Pakistan will face "transitional pain," says Finance minister as IMF approves USD 7 billion loan

Islamabad [Pakistan], September 27 : Pakistan's Finance Minister Muhammad Aurangzeb warned that the country would face "transitional pain" after the International Monetary Fund (IMF) agreed to loan Pakistan USD 7 billion, which the Prime Minister Shehbaz Sharif-led government has pledged would be the last from the Washington-based lender.
"There will be transitional pain, but if we are to make it the last program, then we have to carry out structural reforms," said Aurangzeb while emphasising the need for carrying out reforms.
The new USD 7 billion loan is Pakistan's 25th IMF program since independence in 1947--the highest number of any country, Voice of America reported.
The three-year program "will require sound policies and reforms" to support Pakistan's ongoing efforts to strengthen its economy "and create conditions for a stronger, more inclusive, and resilient growth," the IMF said in a statement.
The government, in July agreed to the deal--its 24th IMF payout since 1958--in exchange for unpopular reforms, including widening its chronically low tax base, Dawn reported.
Pakistan last year came to the brink of default as the economy shrivelled amid political chaos following catastrophic 2022 monsoon floods and decades of mismanagement, as well as a global economic downturn.
The government was saved by last-minute loans from friendly countries as well as an IMF rescue package, but its finances remain in dire straits, with high inflation and staggering public debts, as per Dawn.
"This program should be considered the last program," the Pakistan PM said in July when the loan deal was agreed.
According to Dawn, the finance ministry wrangled for months with IMF officials to unlock the new loan.
It came on the condition of far-reaching reforms, including hiking household bills to remedy a permanently crisis-stricken energy sector and uplifting pitiful tax takings.
In a country of over 240 million people where most jobs are in the informal sector, only 5.2 million filed income tax returns in 2022.
The IMF said Pakistan "has taken key steps to restoring economic stability with consistent reforms." But "despite this progress, Pakistan's vulnerabilities and structural challenges remain formidable," it warned.
"A difficult business environment, weak governance, and an outsized role of the state hinder investment, which remains very low compared to peers," it added.
The development was also announced earlier by the PM's Office.
Shortly after the announcement, Sharif met with IMF chief Kristalina Georgieva in New York and expressed his gratitude for the approval of the loan package.
After their meeting, the IMF boss expressed her approval of Pakistan's economic progress. She congratulated both the government and the people for implementing key reforms, which facilitated the IMF's approval of the program.
Further, Sharif thanked Saudi Arabia, China, and the UAE for their support regarding the package, as well as IMF Managing Director Kristalina Georgieva and her team.
Speaking to reporters in New York, PM Shehbaz expressed optimism, reiterating his hope that this would be Pakistan's final IMF-backed program. "We are committed to ensuring this is the last time we seek such financial support from the IMF," he said.
According to Geo News, it is worth mentioning here that the IMF's Executive Board approved a $7 billion bailout package for Pakistan, the loan program will span 37 months, with the first installment expected by September 30, relieving pressure from external payments.