The International Monetary Fund has approved a $7 billion loan for Pakistan to support its struggling economy. Islamabad has committed that this will be the final time it relies on assistance from the IMF.
This marks Pakistan’s 24th IMF payout since 1958, with the country agreeing to the deal in exchange for implementing unpopular reforms, including expanding its low tax base.
Last year, Pakistan faced a financial crisis due to political instability following devastating monsoon floods in 2022, years of mismanagement, and a global economic downturn. Emergency loans from allies and an IMF rescue package prevented default, but the country still faces challenges such as high inflation and significant public debt.
Prime Minister Shehbaz Sharif stated, “This programme should be considered the last programme. We should tax those who are not being taxed.”
– Dealing with a downturn –
After months of negotiations, Islamabad reached an agreement with the IMF for the $7 billion loan, subject to approval by the organization’s Executive Board over three years.
To receive the loan, Pakistan must enact reforms to address issues like the energy sector crisis and improve tax revenue. The government aims to raise $46 billion in taxes during the 2024-25 fiscal year, including blocking the SIM cards of non-taxpaying mobile users to increase revenue.
The IMF expects the loan conditions to stabilize Pakistan’s economy and foster stronger, more inclusive growth.
However, public debt remains a concern, with analysts questioning the depth of the reforms being implemented and their impact on the country’s governance.
– Public backlash –
Prime Minister Sharif, who came to power in a controversial election, faces opposition to the economic measures introduced by his government. Protests have erupted over tax hikes and austerity measures, with concerns about rising poverty levels in the country.
Pakistan’s previous IMF loan in 2023 also came with unpopular conditions, highlighting the ongoing struggle to balance economic stability with public discontent.
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