The International Monetary Fund (IMF) and Pakistan reached a provisional agreement on Thursday on a $5.3 billion bailout package that aims to bolster Pakistan’s flagging economy and its perilously low foreign exchange reserves.
At a news conference on Thursday evening, Jeffrey Franks, head of the visiting IMF mission to Pakistan, said the package included provisions for a reduction in Pakistan’s budget deficit - which almost hit 9% of gross domestic product last year - and comprehensive energy sector reform.
The rescue package is expected to soothe Western fears about the state of Pakistan’s economy, which has slumped in recent years amid unrelenting Taliban violence and deeply rooted corruption that have shaken investor confidence.
The IMF package also would provide a tangible lift for the newly elected prime minister, Nawaz Sharif, who has already become bogged down by a seemingly intractable energy crisis.
“It was a necessary thing,” said Sakib Sherani, an economist who advised the last government.
The IMF loan, however, is unlikely to be used to directly finance the oil imports needed to get Pakistan’s power stations working at normal capacity, he added.