After a long more than a year of discussion and requests to the IMF, Pakistan finally got its IMF bailout Package of 3 billion dollars at a 3.2% interest rate. Now Pakistan is 4th biggest debt holder with 10.4 billion dollars of the IMF after Argentina (with 46 billion dollars), Egypt (with 18 billion dollars), and Ukraine (with 12.2 billion dollars).
IMF bailout Package
IMF has said officially that the agreement is based on many economic reforms in Pakistan on which Pakistan has agreed. These economic reforms are tough for economically weak nations like Pakistan.
These reforms are:
- Increase in tax revenue by 2.5% of GDP. This can be achieved by increasing the VAT and tax base in Pakistan.
- Reducing expenditure by 1% of GDP. This can be achieved by reducing subsidies (especially electricity subsidies) and reducing the size of the public sector in Pakistan.
- Improving monetary policy in Pakistan by increasing interest rates and selling government bonds.
Even after these tough decisions, there is no guarantee that Pakistan’s economy will become good because they have to pay 76 billion dollars of debt till 2026 and now they are selling their nation’s assets to private and foreign entities.
Also Read: Indian startup ecosystem funding hall fallen