Pakistan is seeking an additional loan from the IMF to confront its crisis

Part of the meeting of Pakistani officials, led by the Minister of Finance, with the IMF delegation in Islamabad (French)

The International Monetary Fund mission began its visit to Pakistan - yesterday, Thursday - to conduct the second review regarding the disbursement of the last tranche of a loan worth $3 billion that was agreed upon between the two parties last summer, according to a statement by the Pakistani Ministry of Finance.

The new Pakistani Minister of Finance, Muhammad Aurangzeb, welcomed the mission, expressing the government’s commitment to working with the Fund on the reform agenda, to achieve economic growth and stability in Pakistan.

For his part, head of the Fund’s mission, Nathan Porter, congratulated Pakistani Finance Minister Aurangzeb on his new position, expressing his hope that the coming period will witness cooperation that serves the interests of both parties.

During the first day of the meeting (which continues until next Monday), talks were held on comprehensive macroeconomic indicators and Islamabad's efforts on fiscal consolidation, structural reform, the viability of the energy sector, and the governance of state-owned companies.

It is worth noting that Pakistan has already obtained two tranches of IMF loans worth $1.9 billion, under an arrangement with a financing agreement.

The current talks will address the date of disbursing the last remaining tranche, worth $1.1 billion.

The International Monetary Fund acknowledged last January that Pakistan's economic activity had stabilized and that inflation had begun to gradually decline, against the backdrop of strong policy adjustment.

The Fund expected that economic growth in Pakistan would reach 2% in the current fiscal year instead of the 2.5% previously expected, as demand is still weak.

Pakistan's economy has witnessed difficulties, as the Pakistani rupee declined by 20% last year, making it one of the worst-performing currencies in the world, with increasing pressure on consumer prices.

Aurangzeb stressed the government’s commitment to working with the Fund on the reform agenda (Reuters)

Additional loan

Aurangzeb told reporters - yesterday, Tuesday - that Pakistan will use the opportunity during the IMF review to demonstrate the need for a larger, long-term program.

The government has not officially announced the size of the additional financing project it seeks, but Bloomberg reported last February that Pakistan is planning to obtain a new loan worth at least $6 billion.

Pakistan's debt-laden economy, which contracted by 0.2% last year, is expected to grow by about 2% this year, but has been under maximum stress with falling reserves, a balance of payments crisis, inflation at 23%, and interest rates at 22%.

Among the economic reforms that the Fund requested from Pakistan were reviewing its budget, raising interest rates, and increasing electricity and gas prices.

The IMF also prompted Pakistan to collect $1.34 billion in new taxes.

These measures led to a significant rise in inflation.

Source: Al Jazeera + agencies