Pakistan PM Sharif Welcomes IMF’s $7 Billion Funding Agreement

Pakistan’s Prime Minister Shehbaz Sharif expressed his gratitude for the International Monetary Fund’s approval of a $7 billion funding agreement for the country, his office announced on Wednesday.

The government in Islamabad has been working diligently to meet the stringent conditions outlined by the IMF to finalize a 37-month loan program that was agreed upon in July. This program is viewed as a critical step for the country, with hopes that it will be the last of its kind needed.

The IMF indicated that the new program will necessitate the implementation of “sound policies and reforms” aimed at enhancing macroeconomic stability and addressing structural challenges. The agreement also envisions continued strong financial support from Pakistan’s development and bilateral partners.

An initial disbursement of around $1 billion is set to occur soon.

During a recent interaction with Pakistani media at the United Nations General Assembly, Sharif noted that Pakistan had successfully met all of the IMF’s conditions, in part due to assistance from China and Saudi Arabia. He acknowledged their support but did not provide specific details on the form of help provided by these countries to finalize the deal.

In addition to financial support from the IMF, loan rollovers and disbursements from long-time allies have played a crucial role in helping Pakistan address its external financing needs in the past.

The government has also committed to increasing its tax revenues in accordance with IMF requirements, despite facing protests in recent months from retailers and some opposition factions concerning the new tax measures and elevated electricity tariffs.

Pakistan has been grappling with cyclical economic issues for decades, having sought IMF assistance 22 times since 1958. Currently, the nation stands as the fifth-largest debtor to the IMF, with outstanding obligations totaling approximately $6.28 billion.

The latest economic crisis has been particularly severe, marked by record-high inflation that led the country perilously close to a sovereign default last summer, prompting the need for an IMF bailout. However, inflation has since decreased, and Moody’s credit ratings agency has upgraded Pakistan’s local and foreign currency issuer ratings from ‘Caa3’ to ‘Caa2’, attributing this improvement to better macroeconomic conditions and enhanced government liquidity and external positions.