Last week the Pakistani Prime Minister met with the Managing Director of the IMF – now the agreement has followed.
(Photo: via REUTERS)
Lahore Pakistan averted default at the last minute. The government agreed on Friday with the International Monetary Fund (IMF) on a new loan of three billion dollars.
The bridging loan gives the country, which is struggling with an acute balance of payments crisis and declining foreign exchange reserves, a breathing space. Prime Minister Shehbaz Sharif said the fresh money will enable Pakistan to achieve economic stability and “put it on the path to sustainable economic growth”.
The government will receive formal documents on the deal from the IMF later on Friday, Finance Minister Ishaq Dar told Reuters. He had to “sign, seal and send it back” by the evening. The IMF Executive Board still has to approve the agreement in July.
Economists had warned that without a new credit line, a haircut could threaten. Investors would then only get back part of the money they lent to the government.
This in turn would have made future business more difficult because fewer lenders would have agreed to new loans or demanded high risk premiums. The IMF funds will also unlock other financing and debt relief – particularly from friendly countries like Saudi Arabia and the United Arab Emirates, which have already pledged around $3 billion.
reforms in return
Pakistan’s economy is struggling with a whole range of difficulties – from the aftermath of devastating floods in 2022 to more expensive raw materials as a result of Russia’s war against Ukraine.
In return for the loan, the IMF is demanding reforms. For example, the energy sector, which is heavily in deficit, should quickly push through higher tariffs in order to cover the costs. This would mean rising prices for consumers who are already suffering from record high inflation.
The central bank, which has raised its key interest rate to 22 percent in the fight against inflation, is also said to remain “proactive”.
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2023-06-30 10:25:50
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