The government will be seeking a bailout package from the International Monetary Fund.
Prime Minister Imran Khan has given a green signal to obtain an IMF bailout package, sources told SAMAA TV.
The decision was taken after the consultation with the Economic Advisory Council. Asad Umar, the finance minister, said that the government will have to take tough decisions to fix the economy.
“We have no other option but to go to the IMF,” Mr Umar said. “We will have to take a loan to support falling economy.”
Umar said the main purpose of the talks will be a “stabilisation recovery programme” to control the country’s economic crisis. However, he did not specify the amount Pakistan would seek.
Umar is expected to meet the officials of the World Bank and IMF during their annual meeting at Indonesia on Tuesday.
Analysts say Pakistan needs a loan of around $12 billion to turn the corner, but a diplomat told AFP in August that Islamabad is betting on a loan of at least $6.5 billion to get it through the crisis.
The IMF said in a statement last Thursday that Pakistan was in need of significant external financing in the near term, and recommended upping gas and power tariffs while also pushing for exchange rate “flexibility” and monetary policy tightening.
“These steps would help reduce current account pressures and improve debt sustainability,” said the fund in a statement, after an IMF delegation completed a routine visit to Pakistan.
The IMF also warned the new government that growth would likely slow and inflation rise further if it does not act fast.
Pakistan has gone to the IMF repeatedly since the late 1980s. The last time was in 2013, when Islamabad got a $6.6 billion loan to tackle an economic crisis. However, there are fears that the terms of any new loan will be more stringent than those in 2013, due to tense relations with the US, the lender’s biggest donor.
In July, US Secretary of State Mike Pompeo voiced concerns over any IMF bailout being used to repay Chinese loans to Islamabad.
“There’s no rationale for IMF tax dollars — and associated with that, American dollars that are part of the IMF funding — for those to go to bail out Chinese bondholders or China itself,” Pompeo told US television station CNBC.