Pakistan and the International Monetary Fund (IMF) have reached a provisional agreement on a bailout of at least $5.3 billion that aims to boost its flagging economy and low foreign exchange reserves.
The three-year loan deal was announced by Pakistan Finance Minister Muhammad Ishaq Dar and IMF mission chief Jeffrey Franks and will top up the central bank’s reserves and give the government time to cut its budget deficit, deal with problems in its energy sector, and increase tax collection.
Pakistan agreed to cut spending and pledged to raise more money through privatisation.
“Pakistan faces a challenging economic outlook, compounded by an uncertain global and regional environment. Macroeconomic imbalances have combined with longstanding structural problems, particularly in the energy sector, to sap the country’s growth potential. Growth has only averaged three percent over the past few years, well below that needed to provide jobs for the rising labour force and to reduce poverty,” the IMF noted in its announcement of the agreement.
“A determined effort is required to improve medium-term growth and move toward sustainable fiscal and external positions,” it added.
The $5.3 billion loan will have an interest rate of roughly three percent.
It will be repaid over 10 years after an initial grace period of four years.
The IMF still needs to obtain approval from its executive board for the new agreement, which is expected in September.
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