IMF approves $1bn loan tranche for Pakistan

3 Feb 22

Pakistan will receive $1bn from a previously-stalled bailout package after the International Monetary Fund’s executive board agreed it had made sufficient progress on policy reforms.

The $6bn deal, of which about $3bn has now been paid out, was agreed in 2019 but paused last year amid faltering progress meeting conditions aimed at achieving budget surpluses.

The IMF announced in November it was reviving the programme, praising Pakistani authorities for progress made amid the challenges of Covid-19 and high inflation.

“The authorities have taken important measures to strengthen fiscal policy and put wider public finances on a sounder footing,” said Antoinette Sayeh, deputy managing director and acting chair of the US-based lender.

“Along with careful spending management, revenue mobilisation will help create space for much-needed spending on infrastructure and social protection, while improving debt sustainability.”

Many businesses went on strike in Pakistan in response to the government increasing the sales tax, despite high inflation – a move the IMF insisted upon as part of the programme.

Sayeh said continued reform of personal income tax and harmonising sales tax is “essential”, and also encouraged “broader reforms” in tax administration and public financial and debt management.

“The authorities’ recent policy efforts to strengthen economic resilience are welcomed,” she said.

“Timely and consistent implementation of policies and reforms remain essential to lay the ground for stronger and more sustainable growth.”

The IMF said Pakistan remains vulnerable to a spike in Covid-19 cases, rising global interest rates and increasing geopolitical tensions.

Prime minister Imran Khan has previously said he wants to foster a “tax culture” in Pakistan, saying increasing revenue would improve economic stability and reduce the government’s reliance on foreign loans.

The country’s debt has risen from 6trn rupees (£25.5bn) in 2008 to more than 50trn rupees (£209bn) late last year, according to State Bank of Pakistan figures.

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