Pakistan will receive funds over 39 months, as structural reform planned to stabilise deficits and reorient economy.
The International Monetary Fund (IMF) and Pakistan have agreed on terms for a $6bn bailout package, to be disbursed over a span of more than three years, bringing an end to months of negotiations with the international lender.
The agreement was confirmed by the IMF which added that the funds would be disbursed over 39 months.
“Pakistan is facing a challenging economic environment, with lacklustre growth, elevated inflation, high indebtedness, and a weak external position,” said Ernesto Ramirez Rigo, the head of the IMF’s mission to Pakistan, said in the statement.
“This reflects the legacy of uneven and procyclical economic policies in recent years aiming to boost growth, but at the expense of rising vulnerabilities and lingering structural and institutional weaknesses.”
Abdul Hafeez Shaikh, Prime Minister Imran Khan’s adviser on finance, said on Sunday that “after negotiations over many months, Pakistan and the IMF have reached a staff-level agreement”.
The IMF said the programme of structural reforms will target increasing government revenues and reducing spending, bringing down the primary fiscal deficit – which excludes development spending – to 0.6 percent of the Gross Domestic Product (GDP) in Pakistan’s upcoming budget.
The overall fiscal deficit currently stands at roughly 1.9 percent of the GDP, according to central bank data.
The programme will include “tax policy revenue mobilisation measures to eliminate exemptions, curtail special treatments, and improve tax administration”.
It will also target Pakistan’s loss-making state-owned enterprises and the country’s energy sector, long plagued by structural issues that have led to a burden of heavy subsidies on the government.
The agreement will now be reviewed by the IMF’s management and board, and approval will be “subject to the timely implementation of prior actions and confirmation of international partners’ financial commitments”, the IMF said.
Shaikh said this agreement would open up at least $2bn in additional financing from the World Bank and the Asian Development Bank.
