Washington, (TDI): The International Monetary Fund (IMF) has released the first tranche of $1 billion to Pakistan as part of a new $7 billion loan program under the Extended Fund Facility, aimed at addressing the country’s financial challenges.
The global lender approved the loan program yesterday, more than two months after both parties initially reached an agreement.
This loan program, which will be disbursed to Pakistan over a period of 37 months, is intended to provide a much-needed boost to the country’s wilting economy.
In its announcement regarding the new loan program, the IMF stated that Pakistan’s economic growth rate reached 2.4% in the last fiscal year, while inflation has significantly decreased to single digits.
This improvement is primarily due to strong performance in the agricultural sector and effective fiscal and monetary policies, which have helped control the current account deficit and improve foreign exchange reserves.
The IMF pointed out that the State Bank of Pakistan (SBP) has lowered its policy rate by 450 basis points since June, contributing to the recovery of foreign exchange reserves. Additionally, a solid budget was presented in June 2024.
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Despite these advancements, the IMF cautioned that Pakistan still faces considerable challenges, including a difficult business environment, weak governance, excessive state intervention, and a limited tax base that hinders private investment.
These issues complicate the country’s ability to achieve fiscal sustainability and adequately fund social and developmental programs.
The IMF emphasized that expenditures on health and education are insufficient for providing lasting relief from poverty, and that inadequate investment in infrastructure limits economic potential.
Reforming public institutions and improving service delivery are key objectives under the loan agreement.
The IMF also stressed the importance of focusing on infrastructure development, addressing climate change, and securing ongoing financial support from development partners for the program’s success.
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Furthermore, the IMF acknowledged Pakistan’s continued implementation of policies under the standby arrangement established in 2023-24, which have taken important steps toward restoring economic stability.
However, it warned that Pakistan must persist in pursuing necessary reforms to avoid falling behind other developing countries, highlighting that significant weaknesses and challenges remain.
