Pakistan has managed to clinch a last-minute relief from the International Monetary Fund (IMF) as the two have agreed on an initial $3 billion loan from the global lender. The development lowers the risk of a sovereign debt default as the South Asian nation continues to grapple with sky-high inflation and staggeringly low exchange reserves.
The country will now hope to secure the funding of at least $1.1 billion from the IMF, after a final review. The development occurs right before the expiration of IMF’s current programme for Pakistan on June 30.
The agreement aims to support Pakistan’s purported efforts to stabilise the economy from recent external shocks, preserve macroeconomic stability and provide a framework for financing from multilateral and bilateral partners. “The new SBA will also create space for social and development spending through improved domestic revenue mobilisation and careful spending execution to help address the needs of the Pakistani people,” the IMF said in an official statement.
The staff-level agreement will now be subjected to approval by the IMF Executive Board, constituted by 24 Directors from countries worldwide.
“I am pleased to announce that the IMF team has reached a staff-level agreement with the Pakistani authorities on a nine-month Stand-by Arrangement (SBA) in the amount of SDR2,250 million (about $3 billion or 111 percent of Pakistan’s IMF quota),” IMF’s Nathan Porter said in an official statement.
“The new SBA builds on the authorities’ efforts under Pakistan’s 2019 EFF-supported program which expires end-June. This agreement is subject to approval by the IMF’s Executive Board, which is expected to consider this request by mid-July,” said Porter, the IMF team leader who held in-person and virtual meetings with the Pakistani Authorities to discuss a new financing engagement.
Pakistan $3 bn IMF loan programme: Upcoming Timeline
According to an IMF statement, the Executive Board’s consideration for $3 billion loan programme towards Pakistan is likely to take place in the middle of July.
Also watch | Pakistan’s last-ditch effort for an IMF loan
The IMF on Friday said that a steadfast policy implementation will be key for Pakistan to overcome its current challenges, “including through greater fiscal discipline, a market-determined exchange rate to absorb external pressures, and further progress on reforms, particularly in the energy sector, to promote climate resilience, and to help improve the business climate.”
Pakistan has availed nearly two dozen bailouts from the Washington-headquartered lender since 1952.
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