Pakistan and IMF reach $7bn aid deal

New programme still needs to be validated by fund's executive board

Pakistan's Prime Minister Shehbaz Sharif at a budget session of the National Assembly in Islamabad. AFP

Pakistan and the International Monetary Fund reached a three-year, $7 billion aid package deal, the Washington-based institution said on Friday.

The new programme, which must be validated by the fund's executive board, should enable Pakistan to “cement macroeconomic stability and create conditions for stronger, more inclusive and resilient growth”, a statement said.

“This includes steps to strengthen fiscal and monetary policy and reforms to broaden the tax base, improve state owned enterprises’ (SOE) management, strengthen competition, secure a level playing field for investment, enhance human capital, and scale up social protection through increased generosity and coverage in the Benazir Income Support Programme."

The IMF's executive board in April authorised $1.1 billion in funding for Pakistan, the final portion of a $3 billion arrangement Islamabad made with the multilateral lender last year.

Pakistan had secured last year's IMF loan so that it could avoid defaulting on its debt.

Nearly two thirds of Pakistan's population of about 230 million people are less than 30 years old, but the country's economy has historically underperformed because of a lethargic bureaucracy, widespread corruption and decades of volatile security that have all made investment in Pakistan a challenging undertaking.

Further complicating Pakistan's outlook is its vulnerability to the effects of climate change, illustrated by the 2022 floods that caused about $30 billion of damage.

“Continued strong financial support from Pakistan’s development and bilateral partners will be critical for the programme to achieve its objectives,” the statement said.