ISLAMABAD – The executive board of the International Monetary Fund has approved a new $7 billion loan for cash-strapped Pakistan, authorities said Wednesday, more than two months after the two sides said they had reached an agreement.
The loan — which Islamabad will receive in installments over 37 months — is aimed at boosting Pakistan's ailing economy, officials added.
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Prime Minister Shehbaz Sharif in a statement hailed the deal that his team had been negotiating with the IMF since June. He thanked Kristalina Georgieva, the head of the IMF and her team, for the approval.
The global lender said its immediate disbursement will be about $1 billion.
In a statement issued Thursday, it praised Pakistan for taking key steps to restore economic stability. Growth has rebounded, inflation has fallen to single digits, and a calm foreign exchange market have allowed the rebuilding of reserve buffers.
But it also criticized authorities. The IMF warned that, despite the progress, Pakistan’s vulnerabilities and structural challenges remained formidable.
It said a difficult business environment, weak governance, and an outsized role of the state hindered investment, while the tax base remained too narrow.
“Spending on health and education has been insufficient to tackle persistent poverty, and inadequate infrastructure investment has limited economic potential and left Pakistan vulnerable to the impact of climate change,” it warned.
The development comes more than two months after the IMF reached a staff-level agreement with Pakistan for the new loan. It also came a day after officials said the global lender's executive board would approve the loan on Wednesday, adding that Pakistan had met all the conditions set by the lender.
Pakistan for decades has been relying on IMF loans to meet its economic needs.
Sharif thanked China and other friendly countries for facilitating Pakistan's deal with the IMF.