IMF releases $1 bln loan tranche to Pakistan

Following the board’s meeting, the International Monetary Fund (IMF) released the first tranche of $1 billion to Pakistan, which approved a $7 billion loan for Islamabad under the Extended Fund Facility. The new loan program for Pakistan spans 37 months.

According to an official statement of the IMF, the fund noted that Pakistan’s economic growth rate has reached 2.4. However, the country still faces major challenges, including a difficult business environment, weak governance, and a limited tax base.

According to the statement, Pakistan has implemented continuous policies under the Stand-By Arrangement over the past year, taking important steps to restore economic stability. The growth rate of 2.4% in FY 2024 is attributed to increased activities in the agricultural sector.

The IMF also reported that inflation has reduced to a single digit. Sound fiscal and monetary policies have helped control the current account deficit, contributing to the rebuilding of foreign exchange reserves. The decline in inflation reflects improvements in both internal and external conditions.

Since June, the State Bank has reduced the policy rate by 450 basis points, further aiding the situation. The IMF commended Pakistan for presenting a strong budget in June 2024.

Additionally, the IMF highlighted that inadequate spending on health and education is insufficient to eradicate poverty, and low investment in infrastructure has limited the country’s economic potential. Pakistan is also vulnerable to the effects of climate change.

The IMF stated the need for appropriate reform adjustments, warning that without reforms, Pakistan risks falling further behind other countries. The success of the program will depend heavily on continuous financial support from development partners.