Pakistan Eyes Enhanced Quota in Upcoming IMF Bailout Request

Pakistan is set to formally request a larger and longer bailout package from the International Monetary Fund (IMF) under the Extended Fund Facility (EFF) next month. The country is expected to seek a bailout package exceeding $8 billion, potentially augmented through climate finance, during the upcoming spring meetings of the IMF/World Bank, also known as the Breton Wood Institutions, scheduled for April 15 to 20 in Washington, DC.

A delegation from Pakistan, led by Finance Minister Muhammad Aurangzeb and including Finance Secretary Imdadullah Bosal, Secretary EAD Kazim Niaz, and State Bank of Pakistan Governor Jamil Ahmed, will participate in the meetings.

Pakistan has two potential avenues for requesting a larger and longer EFF programme. The first is to ask for an enhanced quota, similar to the approach taken in 2008 when Islamabad secured 700% of its quota during the Pakistan Peoples Party (PPP) government. The second possibility is to augment the EFF through a climate finance instrument, for which Pakistan qualifies due to significant climate degradation in recent years. Pakistan may also combine both options to meet the requirements of a longer and larger programme size.

The IMF’s review mission is currently in Pakistan to complete the second review under the $3 billion Standby Arrangement (SBA) programme and release the third and final tranche of $1.1 billion. However, discussions are also being held on the larger EFF programme. If the talks conclude positively, the IMF will release the final tranche of $1.1 billion by April 12.

The IMF mission has shortened its discussion period to March 14 to 18 to prepare the draft Memorandum of Economic and Financial Policies (MEFP) within a limited timeframe. While the Pakistani side may prefer to inform the IMF team about another bailout package verbally, the IMF team is currently focused on discussing the ongoing SBA programme.

There may be similarities between Pakistan and Egypt’s IMF programmes, as Egypt’s funding was recently augmented to $8 billion with stringent conditions, including a 600 basis point increase in the policy rate and an expected devaluation of 30%.

Pakistan is also exploring the possibility of requesting the IMF for a Resilience and Sustainability Facility (RSF), which provides countries with affordable long-term financing with reforms to reduce risks to prospective balance of payments stability, including those related to climate change and pandemic preparedness. This facility aims to strengthen economic resilience and sustainability by supporting policy reforms that reduce macro-critical risks and augmenting policy space and financial buffers to mitigate risks arising from longer-term structural challenges.

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