Strict IMF bailout conditions on Pakistan

2019-07-09 at 10:24

The International Monetary Fund officials say the $6 billion loan package for Pakistan approved by the IMF last week will require “very ambitious” fiscal measures and sustained commitment for the bailout to succeed.

The three-year agreement approved by the IMF board last week, Pakistan’s 13th bailout since the late 1980s, has seen a sharp drop in the value of the rupee currency after the central bank agreed to a “flexible, market-determined exchange rate”.

It also foresees structural economic reforms and a widening of the tax base to boost tax revenues that are currently estimated to account for less than 13% of gross domestic product (GDP) by 4-5 percentage points.

Ernesto Ramirez Rigo, the Fund’s mission chief for Pakistan said the programme targets were tough but Prime Minister Imran Khan’s government, which came to power last year vowing not to turn to the IMF, was committed.

He said, “we certainly think that debt sustainability under the programme will be assured, very ambitious and fiscal consolidation will be mainly through improved revenue collection.”

The tough conditions of the package, which has already seen interest rates hiked by 150 basis points and which will see a raft of tax loopholes closed, has already drawn resentment among households facing inflation running at around 9%.