Pakistan reached a tentative deal to unlock a $1.1 billion tranche of an International Monetary Fund (IMF) bailout deal, the global lender said Wednesday, giving much-needed respite to the South Asian nation.
Last summer, cash-strapped Pakistan sketched a $3 billion deal with the IMF as it battled a balance-of-payments crisis which brought it to the brink of default.
After six days of talks in Islamabad, concluding Tuesday, the IMF said officials had reached a “staff-level agreement” to pay out the latest portion of the deal, subject to board approval in late April.
Pakistan held elections last month, and a shaky coalition government has been tasked with an economic turnaround requiring them to agree to a raft of unpopular IMF belt-tightening measures.
In a statement, the IMF said “Pakistan’s economic and financial position has improved” in recent months.
“However, growth is expected to be modest this year and inflation remains well above target, and ongoing policy and reform efforts are required to address Pakistan’s deep-seated economic vulnerabilities.”
Pakistan has historically been hamstrung by chronically low tax takings and unsustainable subsidies which have seen it accrue huge foreign debts it struggles to pay down without outside assistance.
The new administration — led by Prime Minister Shehbaz Sharif — is also set to barter over a fresh deal after the conclusion of the current nine-month programme.
“We will not pursue it with joy, but out of necessity as we must rebuild our economic foundation, revive our economy, and rid ourselves of debt,” he told his cabinet in televised remarks.
Inflation is soaring at 23 percent, with water, electricity and gas prices increasing at 36 percent, in the nuclear-armed nation of more than 240 million.
February 8 polls were marred by allegations of rigging, with opposition leader Imran Khan jailed and barred from running and his Pakistan Tehreek-e-Insaf (PTI) party subject to a crackdown.
The coalition which has taken power has dismissed the claims and said results should be accepted in the interests of a crucial economic recovery.
On Wednesday, Sharif’s office announced he and other federal ministers would not accept salaries or benefits “in the context of promoting austerity at the government level”.
However, earlier in the day Dawn newspaper said “the government’s recent unveiling of ‘austerity’ measures, ostensibly aimed at reducing expenses, appears to be more about show than actual substance.”
“The gesture does little to address the underlying issues of fiscal irresponsibility that have led to our current economic predicament,” read an editorial by the English-language publication.
