Pakistan’s Finance Minister Muhammad Aurangzeb Discusses New $7 Billion IMF 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. Prime Minister Shehbaz Sharif’s government has pledged that this will be the last loan 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, emphasizing the need for reforms. This new loan is Pakistan’s 25th IMF program since its independence in 1947, the highest number for any country.
The three-year program ‘will require sound policies and reforms’ to support Pakistan’s efforts to strengthen its economy and create conditions for stronger, more inclusive, and resilient growth, according to the IMF.
In July, the government agreed to the deal, its 24th IMF payout since 1958, in exchange for unpopular reforms, including widening its low tax base. Last year, Pakistan nearly defaulted as its economy struggled amid political chaos, catastrophic monsoon floods, and a global economic downturn. The government was saved by last-minute loans from friendly countries and an IMF rescue package, but finances remain dire with high inflation and public debts.
‘This program should be considered the last program,’ said Prime Minister Shehbaz Sharif in July. The finance ministry negotiated for months with IMF officials to unlock the new loan, which came with conditions for far-reaching reforms, including increasing household bills to fix the crisis-stricken energy sector and improving tax collection.
In a country of over 240 million people, only 5.2 million filed income tax returns in 2022. The IMF noted that Pakistan has taken key steps to restore economic stability with consistent reforms but warned that vulnerabilities and structural challenges remain formidable.
Shortly after the announcement, Prime Minister Sharif met with IMF chief Kristalina Georgieva in New York and expressed gratitude for the loan package approval. Georgieva congratulated the government and people of Pakistan for implementing key reforms. Sharif also thanked Saudi Arabia, China, and the UAE for their support.
According to Geo News, the IMF’s Executive Board approved the $7 billion bailout package, which will span 37 months, with the first installment expected by September 30, relieving pressure from external payments.
Doubts Revealed
Finance Minister -: A Finance Minister is a person in the government who is responsible for managing the country’s money and finances. In this case, Muhammad Aurangzeb is the Finance Minister of Pakistan.
IMF -: IMF stands for International Monetary Fund. It is an organization that helps countries by giving them loans and advice to improve their economies.
transitional pain -: Transitional pain means temporary difficulties or problems that happen when making changes. Here, it means Pakistan will face some challenges while making economic reforms.
loan -: A loan is money that is borrowed and needs to be paid back later. Pakistan is borrowing $7 billion from the IMF.
economic reforms -: Economic reforms are changes made to improve a country’s economy. These can include changes in taxes, spending, and regulations.
Prime Minister -: A Prime Minister is the head of the government in some countries. Shehbaz Sharif is the Prime Minister of Pakistan.
tax base expansion -: Tax base expansion means increasing the number of people and businesses that pay taxes. This helps the government collect more money.
energy sector improvements -: Energy sector improvements mean making changes to how a country produces and uses energy, like electricity and fuel, to make it more efficient and reliable.
structural reforms -: Structural reforms are big changes to the way a country’s economy works. These changes are meant to make the economy stronger and more stable.