Finance Minister Muhammad Aurangzeb on Saturday said that the newly bailout deal with the International Monetary Fund (IMF) will help accomplish macroeconomic stability.
The finance minister made the statement after the cash-strapped country touched a three-year, $7 billion aid package agreement, with the Washington-based institution, giving much-needed relief to the struggling economy.
Fin – Min said that under the programme “we need to guarantee structural reforms and bring self-sustainability in areas of communal finance, energy, and state-owned institutions” which he expected to achieve in the next few years.
The new loan program, which needs to be confirmed by the Fund’s Executive Board, should enable Pakistan to “cement macroeconomic stability and create circumstances for stronger, more comprehensive and strong growth,” the IMF said while declaring the deal.
Faced with chronic misconduct, Pakistan’s economy has found itself on the edge, confronted by the COVID-19 pandemic, the effects of the war in Ukraine and supply difficulties that fuelled price rises, as well as record flooding that exaggerated a third of the country in 2022.
With its foreign currency assets declining, the cash-strapped nation found itself in a debt catastrophe and was forced to turn to the IMF, winning its first emergency loan in the summer of 2023.
The newest bailout, coming to Pakistan in the form of loans, follows a commitment by the government to implement reforms, including a major effort to widen the country’s tax base.
In a nation of over 240 million people and where most jobs are in the informal part, only 5.2 million filed income tax returns in 2022.
During the 2024-25 fiscal year which starts July 1, the government aims to increase nearly $46 billion in taxes, a 40% rise from the previous year.
As part of the ambition, the Federal Board of Revenue (FBR) jammed 210,000 SIM cards of users who have not filed tax returns to broaden the revenue bracket earlier this month.
Pakistan started discussions with the moneylender for the new multi-billion-dollar loan contract — its 24th bailout in more than six decades — to support its financial reform program.
While around 40% of the residents already lives below the poverty line, the World Bank said in April it feared that 10 million additional Pakistanis would fall below this edge.
Islamabad also aims to cut its fiscal deficit by 1.5% to 5.9% in the coming year, regarding another key IMF demand.
The last loan — a nine-month $3 billion IMF deal — shown a lifeline.
But it came on the condition of disliked austerity measures, including an end to grants cushioning consumer costs.
In recent months, the current account balance has improved a little, high price increases is just starting to come down, but Pakistan’s foreign debt remains very high at $242 billion.
Overhauling it will still swallow up half of the government’s income in 2024, according to the IMF.
The Fund also anticipates 2% growth this year, with inflation still expected to reach nearly 25% year-on-year, before slowly coming down in 2025 and 2026.
