Pakistan reaches $7 billion aid deal with IMF

WASHINGTON

The International Monetary Fund has said it reached a new $7 billion loan deal with Pakistan in a bid to bolster its faltering economy.

Islamabad agreed in exchange to conduct further unpopular reforms, including widening the South Asian nation's chronically low tax base.

Pakistan last year came to the brink of default as the economy shrivelled amid political chaos, catastrophic 2022 monsoon floods and decades of mismanagement, as well as the global economic downturn.

The nation was saved by last-minute loans from friendly countries, as well as support from the IMF, but its finances remain in dire straits with high inflation and staggering public debts.

The new three-year deal, which still needs approval by the IMF Executive Board, should enable Pakistan to "cement macroeconomic stability and create conditions for stronger, more inclusive and resilient growth," it said in a statement.

Islamabad wrangled for months with IMF officials to unlock the new loan, its 24th payout from the lender in more than six decades.

It came on condition of far-reaching reforms, most notably increasing the chronically low tax base.

In a nation of over 240 million people and where most jobs are in the informal sector, only 5.2 million filed income tax returns in 2022.

Islamabad also aims to reduce its fiscal deficit by 1.5 percent to 5.9 percent in the coming year, heeding another key IMF demand.

Pakistan's last $3 billion loan from the IMF in 2023 proved a lifeline.

But it also came on the condition of unpopular austerity measures, including an end to subsidies cushioning consumer costs.