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Finance minister: Pakistan's new IMF loan program 'on track' for up to $8 billion

FILE - In this photo released by the Pakistan Finance Ministry Press Service, Pakistan's Finance Minister Muhammad Aurangzeb speaks before the country's National Assembly, in Islamabad, June 12, 2024.
FILE - In this photo released by the Pakistan Finance Ministry Press Service, Pakistan's Finance Minister Muhammad Aurangzeb speaks before the country's National Assembly, in Islamabad, June 12, 2024.

Pakistan said Sunday that discussions with the International Monetary Fund to secure a new multibillion-dollar loan program are progressing well and the program “is on track."

Finance Minister Muhammad Aurangzeb confirmed during a news conference that Islamabad is negotiating a three-year loan program valued at $6 - $8 billion to avoid a debt default.

He stated that the government is pursuing the loan facility to sustain macroeconomic and currency stability, increase foreign exchange reserves, and attract foreign direct investment to cash-strapped Pakistan.

"The IMF program is our assurance in terms of macroeconomic stability. We are taking it forward certainly; it is inevitable… without this program, we cannot move forward,” he said.

“We are making positive progress. We are very optimistic that we will be able to take it through the finishing line for an Extended Fund Program, which is going to be larger and longer in nature,” the minister said of his ongoing talks with the U.S.-based global lender.

Aurangzeb underlined the importance of the IMF loan, saying it would help unlock investments from other international financial institutions and countries that are friendly toward Pakistan, including Saudi Arabia and the United Arab Emirates. “They want a backstop for investment, which is the Fund program.”

Last week, Pakistan’s parliament passed the government’s tax-laden budget for the coming fiscal year. Officials claimed the budget would guide the country towards an era of sustainable and inclusive growth. Opposition parties rejected the budget, saying it would be highly inflationary.

Pakistan is facing $25 billion in external debt payments in the coming fiscal year starting in July, a significantly higher amount than its current level of foreign exchange reserves.

US support crucial

Aurangzeb, speaking Sunday, dismissed concerns that a recent resolution in the U.S. Congress calling for a probe into fraud allegations in Pakistan’s February elections would undermine the ongoing talks with the IMF.

Washington’s support is crucial for Islamabad to negotiate the bailout package successfully.

On Tuesday, the U.S. House of Representatives voted 368-7, urging “the full and independent investigation of claims of interference or irregularities” in the February 8 vote.

Prime Minister Shehbaz Sharif’s administration promptly rejected the resolution on Wednesday, saying it “stems from an incomplete understanding of the political situation and electoral process” in Pakistan.

On Friday, ruling coalition lawmakers passed a counter-resolution in the legislative lower house of parliament, decrying the congressional move as an “interference” in Pakistan’s internal affairs.

The opposition party of jailed former Prime Minister Imran Khan and independent observers have persistently alleged that the powerful military was behind widespread rigging, including mobile phone and internet shutdowns on polling day, and unusually delayed results to help its favored political parties to win the elections, charges Pakistan’s election commission denied.

The contentious election has fueled political turmoil in the country of about 250 million people, making it harder for the Sharif administration to tackle the economic crisis and attract much-needed foreign investment.

Since gaining independence in 1947, Pakistan has received 23 bailout packages from the IMF, the most of any country in the world. Critics blame repeated military-led dictatorial rules, financial mismanagement, and corruption by elected governments for hindering democratic and economic progress.