ISLAMABAD: The International Monetary Fund (IMF) has released the first tranche of $1 billion to Pakistan as part of a new $7 billion loan under the Extended Fund Facility, aimed at addressing the country’s financial challenges. This approval comes over two months after an initial agreement and is designed to provide crucial support to Pakistan’s struggling economy over 37 months.
The IMF noted that Pakistan’s economic growth rate reached 2.4% in the last fiscal year, with inflation decreasing to single digits, largely due to a robust agricultural sector and effective fiscal policies that improved the current account deficit and bolstered foreign exchange reserves. The State Bank of Pakistan (SBP) has also lowered its policy rate by 450 basis points since June, aiding in this recovery.
However, the IMF highlighted ongoing challenges, such as a difficult business environment, weak governance, excessive state intervention, and a limited tax base that restricts private investment. These factors hinder fiscal sustainability and social program funding. The IMF emphasized the need for increased investments in health, education, and infrastructure, as well as reforms in public institutions and service delivery.
While acknowledging progress made under previous arrangements, the IMF warned that Pakistan must continue implementing necessary reforms to avoid falling behind other developing nations, as significant weaknesses remain.
