IMF releases report on loan program for Pakistan

• International Monetary Fund (IMF) appreciated the efforts of the federal government to pursue the loan program
• The IMF insisted on maintaining the IMF market-based exchange rate While increasing tax revenue and increasing foreign exchange reserves have been emphasized
• The extension of the loan program to June 2023 will help secure the necessary external financing

WASHINGTON, D.C: International Monetary Fund (IMF) appreciated the efforts of the federal government to pursue the loan program, BOL news reported on Friday. 

According to the details, the IMF authorities put forward the 7th and 8th review reports in which the wrong policies of the previous government were highlighted. Reports reveal that the current government of Pakistan has taken some steps to revive the debt program, including budgeting based on a primary surplus, significantly increasing interest rates, eliminating fuel subsidies, and increasing fuel and electricity prices.

The IMF insisted on maintaining the IMF market-based exchange rate While increasing tax revenue and increasing foreign exchange reserves have been emphasized. Moreover, the demand to strengthen social security and energy sectors was also emphasized.

The extension of the loan program to June 2023 will help secure the necessary external financing, but despite policy reforms, the loan program faces extraordinary risks, the report said.

Due to political instability in recent years, demands and pledges were not fulfilled. Because of the instability, Pakistan faced an unstable external position and an increase in its current account deficit. As per the details, foreign exchange reserves and the value of the rupee decreased significantly, while five targets, including foreign exchange reserves, and primary budget deficit, were not fulfilled. In addition, seven more structural targets were not implemented.

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The report states that the inflation rate is expected to be 20 percent in the current fiscal year, which may lead to nationwide protests, while the current account deficit may be up to 2.5 percent. At the end of the fiscal year, the debt-to-GDP ratio will be 72.1 percent.

According to the IMF, the economic growth rate is expected to be 3.5 percent this year, while the budget deficit is expected to be 4.4 percent of GDP this year.