By Staff Reporter
ISLAMABAD: Prime Minister Shehbaz Sharif conceded on Thursday that the conditions of a new long-term loan from the International Monetary Fund (IMF) would be challenging but stressed the necessity of a fresh bailout to maintain macroeconomic stability.
The country has grappled with significant financial difficulties in recent years, leading to a reliance on external borrowing. Last year, Pakistan implemented structural reforms under a $3 billion short-term IMF loan, which concluded this month.
Sharif’s government is now seeking a larger loan from the IMF to manage its financial obligations over its five-year term. “We are expecting the last installment of $1.1 billion under the standby agreement with the IMF this month,” Sharif told his cabinet. “We will receive it after the IMF board’s approval.”
Finance Minister Muhammad Aurangzeb is set to travel to Washington with his team for spring meetings and to discuss a new program with the IMF. Sharif emphasized that another program with the IMF is crucial for Pakistan to stabilize the economy and gain the trust of international institutions.
The IMF’s Communication Director, Julie Kozack, also confirmed that the IMF board will finalize the release of its last tranche to Pakistan by the end of this month. On March 20, the IMF and Pakistan reached a staff-level agreement on the second and final review under the arrangement. Upon approval, Pakistan will have access to around $1.1bn.
Sharif also directed authorities to devise a comprehensive plan to increase tax revenue without burdening the common man, setting a target of a 15 percent tax-to-GDP ratio during his government’s current tenure.
Pakistan’s narrow tax base and persistent tax evasion have led to insufficient revenue collection, exacerbating the government’s tendency to run a high fiscal deficit. This is often financed through domestic and international borrowing, increasing the nation’s debt burden.
The new administration has decided to digitalize the tax collection system to prevent leakages, even as a large segment of the national economy remains undocumented. Sharif emphasized the importance of expediting the privatization process of state-owned enterprises, especially those incurring losses.
“The government is focusing on gradually reducing public debt, pension and subsidy reforms, and the restructuring and privatization of state-owned enterprises,” he noted. “A comprehensive plan will also be formulated and presented to reduce foreign debt.”
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