IMF denies link to Pakistan’s high-interest loan, stresses structural reforms

The International Monetary Fund (IMF) has clarified that it did not request Pakistan to secure a commercial loan from a European bank at an 11 percent interest rate, contradicting earlier reports. 

An IMF spokesperson stated, “We are not aware of any commercial borrowing at this rate, and such financing is unnecessary for program assurances.”

Earlier this month, Pakistan reportedly secured a $600 million commercial loan from a European bank at a historically high interest rate. The loan was seen as crucial for securing the $7 billion IMF bailout, though the IMF has now clarified that it was not a condition for the program.

In its latest assessment, the IMF acknowledged Pakistan’s progress in restoring economic stability but stressed that the country’s vulnerabilities and structural challenges remain significant.

The IMF’s Executive Board recently approved a 37-month Extended Fund Facility (EFF) arrangement for Pakistan, worth around $7 billion, allowing for an immediate disbursement of $1 billion. 

The approval follows Pakistan’s successful policy implementation under the 2023-24 Stand-by Arrangement (SBA), which saw economic growth rebound to 2.4 percent, inflation drop to single digits, and foreign reserves rebuild amid tighter fiscal and monetary policies.

However, the IMF warned that Pakistan’s narrow tax base, weak governance, and heavy state involvement in the economy continue to hinder investment and long-term growth. 

The Fund also highlighted insufficient spending on health and education and inadequate infrastructure investments, which leave the country vulnerable to climate change impacts.