Pakistan credits China for IMF’s $7 billion relief; braces for ‘transitional pain’ – Times of India

Pakistan on Thursday asked its citizens to brace for “transitional pain” as the International Monetary Fund (IMF) approved a new relief package of $7 billion and credited China for the “tremendous support”. The IMF also agreed to issue an “immediate disbursement” of around $1 billion.
“There will be transitional pain, but if we are to make it the last programme, then we have to carry out structural reforms,” finance minister Muhammad Aurangzeb told Geo News.
Prime Minister Shehbaz Sharif, speaking on the sidelines of the United Nations General Assembly in New York, expressed gratitude for the “tremendous support” from Saudi Arabia, China, and the UAE in securing the deal.
“In the final phase (of negotiations), the IMF’s conditions were related to China. The way the Chinese government supported and strengthened us during this time is something I am truly grateful for,” he told reporters shortly before the deal was announced.
The IMF announced an immediate disbursement of approximately $1 billion and stated that the three-year loan program will necessitate sound policies and reforms to bolster Pakistan’s ongoing efforts to strengthen its economy and foster conditions for stronger, more inclusive, and resilient growth.

In July, Pakistan agreed to the deal, its 24th IMF payout since 1958, in exchange for unpopular reforms such as reducing power subsidies and expanding its historically low tax base.
Economist Kaiser Bengali commented that while the deal will help Pakistan pay back its immediate debts, it does not address the need for reducing government expenditures and only focuses on increasing taxes.
By the end of 2023, Pakistan had accumulated a total debt of more than $250 billion, or 74 percent of its GDP, with about 40 per cent owed to external creditors in foreign currencies. China and Chinese commercial banks are the largest single foreign creditor, followed by the World Bank.

The country narrowly avoided default last year due to last-minute loans from friendly countries and an IMF rescue package, which came with conditions such as increasing household bills and raising tax collection. Despite these challenges, the IMF acknowledged Pakistan’s progress in restoring economic stability through consistent reforms while cautioning that vulnerabilities and structural challenges remain formidable, including a difficult business environment, weak governance, and an outsized role of the state hindering investment.
Pakistan’s economy has stabilized since its near-default last summer, but it remains reliant on IMF bailouts and loans from friendly nations to manage its substantial debt, which consumes half of its yearly revenues.