Islamabad: The International Monetary Fund (IMF), on Wednesday, agreed to equip Pakistan with a USD 6 billion loan package to facilitate the government’s economic reforms agenda; USD 1 billion of which will be rolled out on an immediate basis, according to a news source. The remaining USD 5 billion amount is expected to be provisioned after the completion of successive IMF reviews over a period of 39 months – in order to ensure that is the country follows through with the condition prerequisites set in place by the fund.
Read: IMF suggests policy amendments before releasing USD 6 bn loan
Some of the conditions that Pakistan has agreed to include the imposition of a flexible exchange rate system, increased taxes, as well as a commitment to ending its circular debt crisis. In following through with an additional IMF requirement, the finance ministry will be barred from borrowing funds from the State Bank of Pakistan. This arrangement comes under the Extended Fund Facility (EFF) of the fund; touted as being the toughest out of the 22 loan packages that have been provided by the organisation to the country till date.
As per reports, the IMF will conduct four quarterly and four semiannual reviews to keep a close check on the government’s implementation of its conditions; the first of which will take place in October.
This loan arrangement is expected to ensure the entrenchment of a flexible, market-determined, exchange rate system; meaning that the state bank would no longer be permitted to peg it.
As a corollary of the loan’s domestic economic (policy) impact, the Federal Board of Revenue (FBR) is expected to take stringent measures to realize its set PKR 5.50 trillion tax collection target for the current fiscal year.
Read: IMF presses for more revenue collection
Furthermore, and according to the loan’s agreed-upon terms, the government is required to end the country’s circular debt by December next year; something which will inevitably lead to another surge in the prices of amenities.
Prior to this new loan’s disbursement, Pakistan already owed the IMF a sum of USD 5.9 billion; out of which the government plans to pay back USD 750 million within the current fiscal year.
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