Pakistan seeks $1.7 billion loan from global institutions to pave way for IMF agreement

Pakistan on Friday reached a staff-level agreement with the IMF for a new $7 billion loan with the International Monetary Fund (IMF) to support its economy as well as deal with its debts.

Earlier this year, the IMF approved the immediate release of the final $1.1 billion tranche of a $3 billion bailout to Pakistan. Finance Minister Muhammad Aurangzeb said the government planned to seek a long-term loan to help stabilize the economy after the end of that bailout package.

The new loan deal will last for 37 months. It is aimed at strengthening fiscal and monetary policy as well as reforms to broaden the tax base, improve the management of state-owned enterprises, strengthen competition, secure a level playing field for investment, enhance human capital, and scale up social protection through increased generosity and coverage in a major welfare program, the IMF said.

“The program aims to capitalize on the hard-won macroeconomic stability achieved over the past year by furthering efforts to strengthen public finances, reduce inflation, rebuild external buffers and remove economic distortions to spur private sector-led growth,” said Nathan Porter, IMF’s mission chief to Pakistan.

The agreement is subject to approval by the IMF’s executive board.

Pakistan’s new coalition government presented its first budget in parliament last month, promising an increase of up to 25% in the salaries of government employees and setting an ambitious tax collection target