Pakistan Seeks IMF Nod for $700 Million as Part of $3 Billion Bailout

Pakistan is expecting to receive $700 million from the International Monetary Fund (IMF) as the second installment of a $3 billion loan package, after meeting the agreed conditions and signing a Letter of Intent (LoI) with the global lender.

The IMF’s Executive Board will convene on January 11 in Washington to review Pakistan’s economic performance and approve the release of the second tranche.

The LoI was signed by caretaker Finance Minister Dr Shamshad Akhtar and State Bank of Pakistan (SBP) Governor Jameel Ahmad, in which they pledged to implement the reforms and policies required for the success of the Stand-By Arrangement (SBA) programme.

The SBA programme, which was approved by the IMF in July 2023, aims to support Pakistan’s efforts to stabilize the economy, reduce inflation, restore fiscal discipline, and improve the business climate.

One of the key conditions of the programme is to adopt a market-based exchange rate mechanism, which the Pakistani authorities have reaffirmed their commitment to.

“Yes, Pakistani authorities have signed LoI and dispatched to the fund’s headquarters. Now the signed LoI has been shared with the Board of Directors (BoD) of the IMF and they will consider Pakistan’s request to grant their assent for release of second tranche worth $700 million within the next few days after the board’s meeting,” top official sources said.

The first tranche of $1.2 billion was disbursed to Pakistan in July 2023, after the IMF board approved the SBA programme. In November 2023, Pakistan reached a staff-level agreement with the IMF on the first review of the programme, subject to the board’s approval.

The SBA programme will expire on April 14, 2024, by which time Pakistan is expected to receive the remaining $1.1 billion in three more installments.

The IMF officials have expressed satisfaction with Pakistan’s economic progress and praised the authorities for delivering on their promises.

In December 2023, IMF Executive Director Bahador Bijani, who represents Pakistan and other countries at the board, said that Pakistan was one of the most important countries in the region and the world, and deserved much more.

He made these remarks at an event hosted by Pakistan’s ambassador to the US in honour of friends of Pakistan from International Financial Institutions including IMF, International Finance Corporation (IFC), World Bank (WB), and Multilateral Investment Guarantee Agency (MIGA), at Pakistan House in Washington.

Nathan Porter, IMF Mission Chief to Pakistan, also lauded the actions and policies of the current government, saying that they reflected its commitment to steer the country towards stabilisation.

Pakistan is facing a challenging economic situation, with high inflation, large fiscal and external deficits, and low foreign exchange reserves. The country also has to repay about $1 billion in dollar-denominated debt this year, and is scheduled to hold elections in February.

The IMF loan is expected to help Pakistan address these challenges and boost its growth prospects, while also creating space for social and development spending to help the people of Pakistan.

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