Pakistan Seeks New Multi-Billion Dollar IMF Bailout Program

Pakistan seeks new IMF loan to tackle economic crisis, aims to implement unpopular reforms and privatize state-owned firms to restore investor confidence and achieve sustainable growth.

Nasiru Eneji Abdulrasheed
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Pakistan Seeks New Multi-Billion Dollar IMF Bailout Program

Pakistan Seeks New Multi-Billion Dollar IMF Bailout Program

Pakistan has initiated discussions with the International Monetary Fund (IMF) over a new loan agreement to support its economic reform program. The country is nearing the end of a 9-month, $3 billion loan program with the IMF designed to tackle a balance of payments crisis. Finance Minister Muhammad Aurangzeb stated that Pakistan will likely request a 3-year IMF program to help execute its structural reform agenda.

The new government, led by Prime Minister Shehbaz Sharif, is tasked with implementing unpopular belt-tightening measures to engineer an economic turnaround . Aurangzeb said the market sentiment is in much better shape this fiscal year and that the government is committed to implementing difficult but necessary reforms to ensure long-term economic growth and macroeconomic stability.

Why this matters:The IMF bailout program is indispensable for Pakistan to stabilize its economy, restore investor confidence, and access global financial markets. The reforms tied to the program aim to address fiscal and external imbalances, improve governance and transparency, and pave the way for sustainable and inclusive growth in the country.

As part of the reform program, Pakistan is in the middle of a privatization drive to sell off its state-owned enterprises, starting with the national airline PIA. The finance minister expressed confidence that the privatization of PIA will be completed by the end of June, and if successful, other companies could soon follow.

Pakistan has close economic ties to both the U.S. and China, and is seeking to balance its relationships with the two countries amid their trade war. Aurangzeb also highlighted key initiatives such as the Investment Policy 2023 aimed at attracting more foreign investments, digitalizing the economy, and expanding the tax base.

During his visit to Washington for the IMF and World Bank spring meetings, Aurangzeb will hold talks with the IMF to secure a new multi-billion dollar agreement as soon as possible. He stated, "The goal is to agree on strategies with the IMF and put in place an Extended Fund Facility (EFF) as quickly as possible." Pakistan is looking for a larger loan and a longer time period of two to three years to implement the necessary structural reforms.

Key Takeaways

  • Pakistan initiates talks with IMF for new loan to support economic reforms.
  • New govt. to implement unpopular austerity measures to revive economy.
  • IMF bailout crucial for Pakistan to stabilize economy and access markets.
  • Pakistan plans privatization of state-owned enterprises, starting with PIA.
  • Pakistan seeks larger, longer IMF loan to execute structural reforms.