IMF Approves $7 Billion Loan for Pakistan Under Extended Fund Facility
The International Monetary Fund (IMF) has approved a $7 billion loan for Pakistan under the Extended Fund Facility (EFF), allowing for the immediate disbursement of $1.1 billion. This marks a crucial step in stabilizing Pakistan’s economy as the country faces liquidity challenges and seeks to boost its foreign exchange reserves.
For more on international financial agreements, visit IMF’s Official Page.
Key Policy Goals of the IMF Loan for Pakistan
The IMF loan is designed to enhance macroeconomic stability, reduce inflation, and improve public finances in Pakistan. The program targets a 1% GDP surplus in FY25 and aims to increase tax revenues by 1.5% of GDP. These policy goals include broadening the tax base, removing exemptions, and increasing resources for social protection programs such as the Benazir Income Support Programme (BISP).
For details on economic reforms, check out Ground Zero’s Economy Section.
Economic Impact and Future Prospects
With the IMF’s approval, Pakistan is expected to receive further financial support from bilateral and multilateral sources, helping to rebuild its foreign exchange reserves. The loan is part of a broader plan to reduce economic distortions and promote private-sector growth, ensuring Pakistan’s long-term economic recovery.
The IMF program also promises improved governance in fiscal policies, with commitments to reforms in taxation and electricity tariffs.
International Response and Credit Rating Upgrades
Following the approval of the IMF loan, two international rating agencies, including Moody’s, upgraded Pakistan’s credit rating. In August 2024, Moody’s raised Pakistan’s rating from Caa3 to Caa2, reflecting an improvement in the country’s liquidity and external position.
For more on credit rating upgrades, visit Moody’s Official Website.
Key Takeaways:
•The IMF approved a $7 billion loan for Pakistan under the Extended Fund Facility.
•The loan aims to improve public finances, reduce inflation, and rebuild foreign exchange reserves.
•Pakistan’s credit rating has improved, following the IMF loan and broader financial support from international partners.
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