Thu 04 July 2019:
Pakistan urgently needs funds to shore up its weak economy, but the International Monetary Fund has imposed tough terms.
The International Monetary Fund’s executive board has approved a three-year $6bn bailout plan requested by the government of Pakistani Prime Minister Imran Khan to resuscitate the country’s ailing economy. The IMF had reached a staff-level agreement for the loan facility on May 12.
In a statement late on Wednesday, the IMF said the loan will help reduce public debt and expand social spending. But the IMF has attached some tough terms, including a commitment to let the market decide the Pakistani rupee rate, rather than allowing it to be supported by the Central Bank. The rupee has plunged more than 40 percent in the last year.
But with dangerously low foreign reserves, a tax base of barely one percent of its population, crushing trade deficits and a hefty defence budget, Khan has travelled the globe since his election last year seeking funds. The first IMF disbursement will be $1bn, with the remainder to be phased in over the period of the programme subject to quarterly reviews, the IMF said.
“Pakistan is facing significant economic challenges on the back of large fiscal and financial needs and weak and unbalanced growth,” the IMF’s First Deputy Managing Director David Lipton said in the statement. “In this context, the authorities’ programme aims to tackle long-standing policy and structural weaknesses, restore macroeconomic stability, catalyze significant international financial support, and promote strong and sustainable growth.”
The IMF wants Pakistan to increase the proportion of its people who pay taxes and for the government to reduce public debt. But protecting the most vulnerable “will be an important priority” as the government makes these changes, Lipton said.
“This will be achieved by a significant increase in resources allocated to key social assistance programmes, supporting measures for the economic empowerment of women, and investment in areas where poverty is high.”
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