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Pakistan, IMF Make Progress on $7 Billion Loan Agreement

IMF Mission Chief Nathan Porter confirmed the development.

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Islamabad: Pakistan and the International Monetary Fund (IMF) have made significant progress toward a Staff-Level Agreement (SLA) on the first review of the $7 billion loan program.

IMF Mission Chief Nathan Porter confirmed the development. He stated that discussions between the lender and Pakistani authorities moved forward on economic reforms under the Extended Fund Facility (EFF).

Loan Review and Future Funding

The IMF team, led by Porter, visited Pakistan from February 24 to March 14. They assessed Pakistan’s economic policies and considered a potential new arrangement under the Resilience and Sustainability Facility (RSF).

If the IMF approves the loan review, Pakistan will receive a $1 billion disbursement as the second installment of the package. The government expects a total of $2.2 billion from the EFF and RSF combined.

Economic Reforms and Key Areas of Progress

Porter highlighted Pakistan’s strong implementation of the IMF program. He mentioned that both sides reached agreements on key economic reforms, including:

  • Fiscal consolidation to reduce public debt.
  • Tight monetary policy to control inflation.
  • Energy sector reforms to cut costs.
  • Structural changes to boost growth and social spending.

Pakistan also made progress in climate-related financial planning. The government proposed projects to strengthen disaster resilience, which may qualify for additional IMF support.

Read: PM Shehbaz Lays Foundation Stone for Daanish University

Pakistan’s Formal Request for Additional Funds

In October 2024, Pakistan formally requested $1 billion under the Resilience and Sustainability Trust (RST). The IMF is reviewing the proposal.

Finance Minister Muhammad Aurangzeb confirmed significant progress in negotiations. He stated that virtual discussions with the IMF will continue next week to finalize the agreement.

Revised Economic Projections

Pakistan and the IMF revised economic projections during the review process. The country’s GDP estimate for the fiscal year was reduced from Rs123 trillion to Rs116.5 trillion. The real GDP growth forecast also declined. However, inflation estimates improved, with CPI-based inflation now expected at 7%, down from 12.5%.

The government aims to secure additional climate finance under the IMF’s RSF. A dedicated fund will be created to support climate resilience projects. These efforts align with the IMF’s broader environmental goals.

IMF Approves Scrapping of Tajir Dost Scheme

The IMF agreed to eliminate the Tajir Dost Scheme (TDS). The Federal Board of Revenue (FBR) provided data showing that tax collections from retailers and wholesalers surpassed expectations.

FBR introduced Video Analytics Rules to monitor production and expand the tax base. However, the IMF has not yet decided on the FBR’s proposal to reduce real estate tax rates.

A senior government official confirmed that the IMF was convinced to drop the TDS after reviewing data. The FBR had already collected over Rs400 billion from retailers and traders. With further revenue expected, the IMF found the TDS unnecessary.

Tax Collection Targets Adjusted

Pakistan committed to achieving a 10.6% tax-to-GDP ratio by June 30, 2025. Due to economic adjustments, the FBR’s tax target was revised from Rs12,970 billion to Rs12,350 billion.

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