Pakistan: The International Monetary Fund (IMF) granted $3 billion in stand-by arrangement to Pakistan. The announcement was made after a staff-level meeting between representatives. The loan is vital for Pakistan as it continues to navigate through inflation, floods and defaults. The deal is subject to approval from the IMF board. Pakistan Finance Minister Ishaq Dar made the announcement via Twitter stating letter of intent to the IMF will be sent by Friday night.
Pakistan made revisions to policy measures and its fiscal budget for 2023-24 to meet IMF criteria for receiving loan.
Crisis in Pakistan
Pakistan has been through its worst economic crisis in decade. The country is undergoing high inflation and dwindling foreign exchange reserve barely sufficient for one month. A non issuance of funds could push Pakistan into debt default.
IMF official Nathan Porter stated “Despite the authorities’ efforts to reduce imports and the trade deficit, reserves have declined to very low levels. Liquidity conditions in the power sector also remain acute. Given these challenges, the new arrangement would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead.”
The deal is build upon 2019 agreement of $6.5 billion bailout package out of which $4 billion had been received.
Troubles in making deal
The Pakistani administration is making considerable changes to many of its policies. The demands from IMF included removing subsidies in the power and export sectors, hike in energy and fuel prices, adoption of a market-based currency exchange rate and arrangement of external financing through other sources. The changes brought about hyper inflation in the country and floods in Indus River system further deteriorated the country’s situation.
Porter hopes that new policies will widen tax base and cash handout program will help vulnerable combat the crisis.
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