On Wednesday, the Board of Directors of the International Monetary Fund (IMF) approved an agreement with Pakistan for a new $7 billion aid program spanning three years. The Pakistani government has pledged that this will be the final program of its kind.
This aid initiative marks the 24th disbursement to Pakistan since 1958 and is aimed at supporting Islamabad’s efforts to strengthen its economy and “create conditions for solid, inclusive, and sustained growth,” as stated by the IMF.
Faced with dwindling foreign exchange reserves, Pakistan found itself in a debt crisis and was compelled to seek assistance from the IMF. It secured its first loan just in time during the summer of 2023, although this came at the expense of eliminating energy subsidies and implementing austerity measures.
At the end of June, the government approved a package that combined new austerity measures with significant tax increases, with the goal of generating 40% more revenue than in the previous year.
The IMF said Pakistan “has taken key steps to restoring economic stability with consistent reforms.” But “despite this progress, Pakistan’s vulnerabilities and structural challenges remain formidable,” it warned.
