The head of the International Monetary Fund has praised Pakistan's economic reforms, crediting them for the approval of a new $7 billion loan program for the financially struggling nation.
The remarks by IMF Managing Director Kristalina Georgieva were aired on Pakistani television channels Thursday.
"We have completed the review of the program very successfully," Georgieva said in New York after an interaction with Pakistani Prime Minister Shehbaz Sharif on the sidelines of the United Nations General Assembly.
The IMF agreed to the 37-month loan facility under the Extended Fund Facility on Wednesday and authorized the immediate release of the first tranche of nearly $1.1 billion, saying Islamabad has taken vital steps to restore economic stability.
"I want to congratulate the government of Pakistan and the people of Pakistan for moving forward with the home-defined, Pakistan-owned reforms, and they are bringing fruits," she stated. "Growth is up, inflation is down, and the economy is on a sound path."
Georgieva said that she could "sense" the Sharif government's aim was to collect taxes from the wealthy and strengthen social programs to support the poor in Pakistan, which she has been pressing for a long time.
Sharif "expressed satisfaction" and hailed the IMF's approval of the much-needed loan, his office said in Islamabad on Wednesday. The statement said that the Pakistani prime minister thanked Georgieva and his own economic team for successfully negotiating the loan deal.
The new $7 billion loan is Pakistan's 25th IMF program since independence in 1947 — the highest number of any country.
"We are committed to ensuring this is the last time we seek such financial support from the IMF," Sharif reiterated before Wednesday's loan approval.
However, critics remain skeptical about his assertions. The IMF statement on Wednesday cautioned that Pakistan's economy still faces significant vulnerabilities and structural challenges.
"A difficult business environment, weak governance, and an outsized role of the state hinder investment, which remains very low compared to peers, while the tax base remains too narrow to ensure tax fairness, fiscal sustainability and meet Pakistan's large social and development spending needs," the Washington-based institution said.
Experts blame chronic economic mismanagement, corruption, repeated dictatorial military regimes, and the failure of successive elected governments to introduce much-needed reforms for Pakistan's financial troubles.
Islamabad has previously managed its external funding needs with loans, economic support from its long-standing allies, and IMF bailout financial programs .
"Continued strong financial support from Pakistan's development and bilateral partners will also be critical for the program to achieve its objectives," the IMF said Wednesday.
Sharif noted in his New York media talk that the IMF had "set stringent conditions" for the loan program preliminarily agreed to in July. He credited longtime Pakistan allies China, Saudi Arabia, and the United Arab Emirates, with helping Islamabad finalize the IMF deal, but he did not elaborate.
Pakistan was required to seek an extension on existing $5 billion, $4 billion, and $3 billion cash loan facilities from Riyadh, Beijing, and Abu Dhabi to fulfill a critical IMF condition.
Islamabad reportedly has committed not to repay more than $12 billion in debt to three allied nations and Kuwait during the 37-month IMF program period.
Pakistan has utilized IMF bailout loans to fulfill its debt obligations and prevent a sovereign default on its payments, a crisis that led the country to the verge of economic collapse last summer.
The country reportedly faces around $26 billion in loan repayments in the current fiscal year that started on July 1.
The thrust of the new program is to get fiscal policies right," Pakistani economic expert Shahbaz Rana said in comments the United States Institute of Peace published on its website shortly after the IMF approved the $7 billion loan.
"These include bringing retail, agriculture, and export sectors into the normal income tax regime by the imposition of massive tax increases and abolishing of exemptions," Rana said.
