Pakistan has reached an agreement with the International Monetary Fund for $6 billion bailout package. The financial aid is an attempt to help the country strengthen its slowing economy, improve public finances and reduce debt, IMF said in a statement on Sunday. The funding, which still needs approval by the IMF board in Washington, would be provided over three years.
“Pakistan is facing a challenging economic environment, with lackluster growth, elevated inflation, high indebtedness, and a weak external position,” the IMF said. “The authorities recognize the need to address these challenges, as well as to tackle the large informality in the economy, the low spending in human capital, and poverty.”
The agreement comes after months of negotiations and is the latest addition to a series of bailouts that Pakistan has received from the IMF. The Pakistani government has received financial aid from Saudi Arabia and the United Arab Emirates.
The global lender said that it has agreed to provide the Extended Fund Arrangement in an attempt to support the authorities’ “ambitious macroeconomic and structural reform agenda during the next three years”. “This includes improving public finances and reducing public debt through tax policy and administrative reforms to strengthen revenue mobilization and ensure a more equal and transparent distribution of the tax burden,” the IMF said.
Confirming the deal, Pakistan’s advisor on finance, Abdul Hafeez Shaikh, said that the country will receive the funds to meet its foreign debt obligations. “So Pakistan will get $6 billion from the IMF, and in addition, we will get $2 to $3 billion from the World Bank and Asian Development Bank in the next three years,” AFP quoted Shaikh as saying in a state televison broadcast.
On May 4, Pakistan Prime Minister Imran Khan had fired State Bank of Pakistan Governor Tariq Bajwa and appointed IMF economist Reza Baqir to a three-year term. Khan also sacked Federal Board of Revenue Chairperson Mohammad Jehanzeb Khan. Both were removed from their positions due to poor performance, the Pakistan government had said.
Pakistan’s increasing foreign debt has widened the deficit in its current account. The country’s currency has also been losing its value since 2017. In 2018, the country also reduced its investment in the China Pakistan Economic Corridor.