The Multilateralist

Pakistan Finally Gets Its IMF Loan

Pakistan Finally Gets Its IMF Loan

At long last, the International Monetary Fund has approved a new loan for Pakistan. The new package totals almost $7 billion. The last package collapsed amidst disagreement over whether Pakistan was complying with loan conditions and it’s taken years to negotiate a new version. Pakistan’s Express Tribune provides some context:

It is the 16th programme that Pakistan and the IMF have agreed since 1958.

Both parties have a chequered history, with Islamabad earning the reputation of a one-tranche nation – a veiled reference to the country’s track record of taking loans at critical times but abandoning them prematurely, either because a crisis of balance of payments averts or because further disbursements required some tough policy actions.

The Fund wants plenty of tough action this time as well, particularly on the country’s tax system:

[T]o ensure medium-term fiscal sustainability and create fiscal space for social and investment spending, it is important to raise the tax-to-GDP ratio, including by broadening the tax base through a reduction in exemptions and concessions and extending taxation to areas currently not fully covered by the tax net. An overhaul of tax administration is also required, and provinces should contribute fully to the adjustment effort.