IMF approves revival of massive Pakistan loan program

The IMF board on Monday approved an agreement to revive a massive loan program for Pakistan, as the country grapples with devastating monsoon flooding that has worsened an economic crisis.

The Washington-based crisis lender will release $1.1 billion to the country immediately, and has added an additional $500 million to the total size of the package, bringing it to about $6.5 billion.

In addition, the International Monetary Fund agreed to the government’s request to extend the package through June 2023.

The original $6 billion bailout package was signed by former prime minister Imran Khan in 2019, but repeatedly stalled when his government reneged on agreed reforms on subsidies and failed to significantly improve tax collection.

The aid comes as “Pakistan’s economy has been buffeted by adverse external conditions, due to spillovers from the war in Ukraine, and domestic challenges,” said IMF Deputy Managing Director Antoinette Sayeh in a statement.

“Steadfast implementation of corrective policies and reforms remain essential to regain macroeconomic stability, address imbalances and lay the foundation for inclusive and sustainable growth,” she said.

The government reached an agreement with IMF staff last month to restart the suspended aid package.

The new agreement follows months of deeply unpopular belt-tightening by the government of Shehbaz Sharif, who took power in April and has effectively eliminated fuel subsidies and introduced new measures to broaden the tax base.

Finance Minister Miftah Ismail, announcing the approval on Twitter, applauded Sharif “for taking so many tough decisions and saving Pakistan from default.”

The latest disbursement brings the total received under the IMF Extended Fund Facility to about $4 billion.

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