IMF executive board approves $7 billion loan program for Pakistan

ISLAMABAD: Prime Minister Shehbaz Sharif welcomed the International Monetary Fund’s (IMF) decision to approve a $7 billion loan program for the country, his office said on Wednesday.
The IMF has approved the bailout package for Pakistan after the South Asian nation agreed to strengthen fiscal and monetary policy and implement reforms to broaden the tax base, secure a level playing field for investment and enhance human capital.
In July, the Fund reached a staff-level agreement on economic policies with Pakistan for 37-month Extended Fund Facility (EFF) of about $7 billion. The IMF executive board has now approved the 25th loan program that Pakistan has obtained since 1958.
 “We will continue to struggle to achieve economic progress targets,” the prime minister said while expressing satisfaction over approval of the IMF loan package.
“If this hard work continues, this will be Pakistan’s last IMF program,” he continued while thanking the friendly countries including Saudi Arabia, China and the United Arab Emirates for their support to get the program.
Economists have termed the loan approval a positive development that would help boost investors’ confidence and make it possible for the government to tap international markets for the commercial borrowing.
Dr. Khaqan Hassan Najeeb, senior economist and former adviser to the government, said Pakistan’s engagement with the IMF could strengthen the nascent macroeconomic stability.
“It will ensure the $26 billion, Pakistan’s gross financing needs are fully met and can bring the other lenders, commercial banks, bilateral and multilateral partners on board,” he told Arab News.
“More importantly, it buys Pakistan time and breathing space to do the structural work that is necessary to put the economy on a path that it does not have to go to the doorsteps of the IMF for the 26th time,” he said.
Ahsan Mehanti, chief executive officer of Arif Habib Corporation, one of Pakistan’s leading business groups termed the IMF loan approval “a positive development,” saying this would help the country get the bilateral and multilateral support from different financial institutions including activation of $2 billion loan from the Asian Development Bank.
“This IMF loan program will help the stocks reach new heights with a boost to investor confidence and stabilize the rupee against the US dollar,” Mehanti told Arab News.
The IMF said in its statement the three-year loan program “will require sound policies and reforms” to support Pakistan’s ongoing efforts to strengthen its economy “and create conditions for a stronger, more inclusive, and resilient growth.”
It acknowledged Pakistan “has taken key steps to restoring economic stability with consistent reforms,” though it noted that the country’s vulnerabilities and structural challenges remained formidable.
“A difficult business environment, weak governance, and an outsized role of the state hinder investment, which remains very low compared to peers,” it added.
IMF Chief Kristalina Georgieva also held a brief meeting with the Pakistani prime minister on the sidelines of the 79th United Nations General Assembly Session.
“We do have good news,” she told the media following the meeting. “We have completed the review of the [loan] program successfully. I want to congratulate the government of Pakistan and the people of Pakistan for moving forward with the home-defined, Pakistan-owned reforms, and they are bringing fruits. Growth is up. Inflation is down. The economy is on a sound path.”
“The government aims to collect taxes from the rich and strengthening the Benazir social program to support the poor,” she added.
With input from AFP