Economic Crisis in Pakistan, Agreement Reached to Resume IMF Bailout Program

On the 16th of last month (local time), an employee at a gas station in Karachi, Pakistan, is putting up a new price list following the government's announcement of an increase in petroleum product prices the previous night.

Pakistan is expected to receive International Monetary Fund (IMF) bailout support again.

On the 14th, according to local Pakistani media such as Geo News and foreign media, the IMF announced that it had agreed in working-level negotiations to provide an additional $1.17 billion (approximately 1.538 trillion KRW) to Pakistan through the Extended Fund Facility (EFF) program.

In 2019, Pakistan agreed to receive a $6 billion (approximately 7.9 trillion KRW) bailout from the IMF over three years. However, due to disagreements over tax revenue expansion and other issues, only $3 billion (approximately 3.9 trillion KRW) was received before the support was suspended.

The IMF demanded stringent tax revenue expansion policies, including reducing fuel subsidies and ending exemptions on business taxes.

Pakistan has been negotiating support while complying with the IMF's conditions. It made efforts to resume support by significantly raising fuel prices and announcing in late last month that it would impose an additional 10% tax for one year on large industries such as steel, textiles, and automobiles.

If this working-level agreement is approved by the IMF board and funds are supplied, Pakistan's support amount will increase to $4.2 billion (5.51 trillion KRW). The IMF is also considering expanding the total support amount to $7 billion (9.2 trillion KRW) and extending the support period until June next year.

Pakistan has fallen into a severe economic crisis due to large external debt from massive infrastructure investments combined with the COVID-19 pandemic. Consumer prices in June rose 21.3% compared to the same period last year, marking the highest in 14 years. As of the fourth quarter of last year, total external debt reached $130 billion (approximately 170.7 trillion KRW), but the central bank's foreign currency reserves have recently decreased to around $10 billion (approximately 13.1 trillion KRW).

This content was produced with the assistance of AI translation services.