New Delhi: The International Monetary Fund (IMF) has approved a new bailout package of seven billion dollars for Pakistan. The cash-strapped country has been allowed to immediately release the first loan installment of less than $ 1.1 billion to deal with the economic crisis.

The IMF board approved a staff-level agreement with Pakistan at a meeting in Washington on Wednesday after Pakistan promised to reform its agricultural income tax, transfer some fiscal responsibilities to the provinces and limit subsidies.

Pakistan's Prime Minister's Office confirmed that the IMF Executive Board has approved a 37-month Extended Fund Facility (EFF) totalling $7 billion. This is the 25th IMF programme and the sixth EFF received by Pakistan since 1958.

IMF praised Pakistan

In a statement issued on Thursday, the IMF has also praised Pakistan for taking several important steps for economic improvement, which has accelerated development. Also, the public has got relief from inflation and it has come down to single digit. There is peace in the foreign exchange market, which helped Pakistan to replenish its reserves.

However, the IMF also expressed concern on some aspects. It warned that even though Pakistan has started moving on the path of progress, some of its structural challenges remain. For example, the business environment is difficult. Investment is being hindered due to a weak government.

The IMF said that government officials are also spoiling the work by creating obstructions. The tax base also remains very small. Also, the government is not spending enough on education and health.