Pakistan and IMF Begin Review Talks for $7 Billion Loan Program
An International Monetary Fund (IMF) mission has arrived in Pakistan to begin a two-week review of the country's $7 billion Extended Financing Facility (EFF). The talks, led by Finance Minister Muhammad Aurangzeb, will assess performance against targets set for June 2025, which have been mixed. Notably, revenue collection has fallen short by nearly 1% of GDP. The discussions will focus on agreeing to corrective measures to meet future targets and push for faster implementation of economic reforms.
Unpacked:
The EFF is an IMF program aimed at helping countries address serious balance of payments problems with structural reforms and longer-term support. Pakistan has turned to the EFF multiple times due to recurring fiscal deficits, external payment challenges, and the need for economic reforms to stabilize its economy.
The IMF is urging Pakistan to advance reforms that include strengthening competition, increasing productivity, reforming state-owned enterprises, improving public services and energy sector viability, and raising tax revenues to meet agreed fiscal targets.
If Pakistan fails to meet IMF targets, disbursement of future loan tranches may be delayed or withheld. The IMF may also demand corrective measures, such as stricter fiscal policies or additional reforms, to ensure compliance and continued support.
Pakistan has frequently sought IMF assistance since the 1950s, with over twenty loan programs. In recent years, increased borrowing, mixed compliance with conditions, and persistent economic challenges have led to ongoing scrutiny and debate over the effectiveness of IMF support.