Pakistan, IMF continue negotiations over new bailout package

ISLAMABAD: The government of Pakistan is in the process of negotiations with the International Monetary Fund (IMF) over a new bailout package. The IMF is demanding substantial expenditure cuts as Pakistan grapples with the heavy burden of its burgeoning debt.

Sources indicate that the interest on Pakistan’s loans is projected to soar to an unprecedented Rs 9,787 billion in the next financial year. This marks a significant increase from the current fiscal year’s target of Rs 7,303 billion. Alarmingly, interest payments alone are anticipated to reach Rs 8,371 billion, which is Rs 1,068 billion higher than initially targeted.

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In the first nine months of this fiscal year, Pakistan has already paid Rs 5,518 billion in interest on both domestic and external loans. This amount surpasses the federal government’s net income of Rs 5,313 billion for the same period, further underscoring the severity of the financial strain.

The interest payments exceeded the net income by Rs 205 billion, highlighting the urgent need for fiscal reforms.

The IMF has expressed concerns over Pakistan’s external financial obligations and the high interest rates, which pose significant risks to the sustainability of the country’s loans. The success of reducing Pakistan’s debt obligations is contingent upon the consistent implementation of stringent policies advocated by the IMF.

In an effort to stabilise the economy, Pakistan aims to lower its loan-to-GDP ratio to 70 per cent from the current 72.1 per cent in the upcoming financial year. However, achieving this goal will require navigating through the IMF’s stringent requirements and maintaining fiscal discipline.

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As the negotiations proceed, the outcome will be pivotal for Pakistan’s economic future, determining the nation’s ability to manage its debt and sustain long-term financial stability.

The government and the IMF are expected to continue their discussions in the coming weeks, with hopes of reaching an agreement that addresses Pakistan’s financial challenges while ensuring economic growth.