Pakistan braces for ‘transitional pain’ as IMF approves $7bn loan

File: The entrance to Fort Hare University.
Former Tshwane Mayor Cilliers Brink. 
Michael Lomas in court.
Lual Akuei
ISLAMABAD – Pakistan said it would have to go through “transitional pain” after the International Monetary Fund agreed to a new relief package of $7-billion to bolster its faltering economy.
Although the South Asian nation’s economy has stabilised since it came close to defaulting last summer, it is dependent on IMF bailouts and loans from friendly countries to service its huge debt, which swallows up half of its annual revenues.
“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 local broadcaster Geo News.
The IMF said in a statement it would issue an “immediate disbursement” of around $1 billion.
“This past year has seen a very welcome return to economic stability in Pakistan,” IMF Pakistan mission chief Nathan Porter told reporters on Thursday. 
“The challenge confronting Pakistan now is to move beyond this renewed sense of stability and towards stronger and sustained growth, with its benefits shared more broadly and evenly across society,” he added. 
Pakistan in July agreed to the deal — its 24th IMF payout since 1958 — in exchange for unpopular reforms, including cutting back on power subsidies and widening its chronically low tax base.
Speaking on the sidelines of the United Nations General Assembly in New York on Wednesday, Prime Minister Shehbaz Sharif said the deal came through thanks to the “tremendous support” of Saudi Arabia, China and the United Arab Emirates.
“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. 
Last month, Aurangzeb had said Pakistan was negotiating a $12-billion loan reprofiling from bilateral lenders.
The amount comprised $5-billion from Saudi Arabia, $4-billion from China and $3-billion from the UAE for a three- to five-year period.
Porter said all three countries had “provided significant financing assurances,” beyond these commitments to rolling over the $12-billion in existing loans.
Reacting to the news, Pakistan’s stock exchange briefly reached a new record high before losing ground in later trade.