The International Monetary Fund (IMF) has approved a new $1.3 billion loan program for Pakistan while reviewing an existing bailout that could release an additional $1 billion. The new 28-month program aims to support Pakistan’s efforts to mitigate climate change and improve economic stability.

Loan Approval Pending Executive Board Consent

Although the agreement has been reached, both the new program and the loan review require approval from the IMF’s executive board, which is generally a formality. The approval will allow Pakistan to access fresh funds and continue with economic reforms.

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Pakistan’s Economic Crisis and IMF Bailouts

In 2023, Pakistan faced a severe economic crisis, teetering on the brink of default due to a combination of political instability and economic downturn. The nation was saved by a $7 billion bailout from the IMF, which came with strict conditions, including improving income tax revenue and cutting power subsidies.

Progress on Macroeconomic Stability

According to Nathan Porter, IMF mission chief, Pakistan has made “significant progress” in restoring macroeconomic stability and rebuilding confidence despite global challenges. The country has witnessed improvements, with inflation easing and foreign exchange reserves increasing.

Commitment to Fiscal Consolidation

Pakistani authorities have committed to gradual fiscal consolidation to reduce public debt sustainably. Measures include tight monetary policies, cost-cutting efforts, and reforms aimed at boosting the economy.

Potential Release of Additional Funds

If the agreement is approved by the IMF’s executive board, Pakistan will gain access to an additional $1 billion, bringing total disbursements under the existing 37-month program to approximately $2 billion.

Focus on Long-term Reforms

The new loan program also emphasizes long-term reforms aimed at addressing climate challenges and improving Pakistan’s overall economic structure.