Agreement is preliminary and must be evaluated by the Fund’s executive board; country is experiencing one of its worst economic crises
The IMF (International Monetary Fund) announced on Thursday (29.jun.2023) reached a preliminary agreement with Pakistan for a 9-month financing totaling US$ 3 billion. The amount should help the country avoid defaults.
The agreement will be evaluated by the Fund’s executive board. According to the IMF, the completion of the process is scheduled for mid-July.
According to the newspaper Financial Times, Pakistan is experiencing one of its worst economic crises. Foreign reserves dropped to US$3.5 billion, enough for less than 1 month of imports. In May, Pakistani inflation reached a record high of 38%.
The government has about $25 billion outstanding in debt payments in the fiscal year starting in July. Analysts say the country would struggle to meet its obligations without financial assistance from creditors such as China and Saudi Arabia, as well as help from the IMF.
According to FT, the financing negotiations took place in a tense atmosphere. The International Monetary Fund has urged Pakistan to take steps to broaden the tax base, free up resources for development spending and carry out liberal reforms in the economy.
The advance occurred after the country gave positive signals and approved tax increases, cut energy subsidies and removed monetary and import restrictions.
Economists heard by Financial Times assess that the agreement with the IMF alleviates the situation, but does not solve the systemic problems of Pakistan’s economy. Economic activity has slowed sharply, leading to shortages of vital imports and rising poverty.
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