IMF sets another condition for crisis-hit Pakistan to revive loan

The Pakistani government has made various economic modifications including hikes in fuel prices, raising taxes, and others demanded by the financial body for loans. The funds are part of a USD 6.5 billion bailout package the IMF approved in 2019 — vital to Pakistan to avert defaulting on external payment obligations. 

However, no funding has been granted to the cash-strapped country yet.

IMF has now asked Islamabad to provide external financing assurances before it takes the next step with Pakistan to release the bailout tranche, according to a report published by pkrevenue. 

Addressing a press briefing, Julie Kozack, the IMF’s Director of Strategic Communications said, “Timely financial assistance from external partners will be critical to support the authorities’ policy efforts and ensure the successful completion of the review (with Pakistan).”

“Ensuring that there is sufficient financing to support the authorities is the paramount priority. A Staff Level Agreement (SLA) will follow once the few remaining points are closed. We do need to ensure that we have those financing assurances in place in order for us to be able to take the next step with Pakistan,” she added. 

The financial body wants Pakistan to get the assurance of up to USD 7 billion to fund this fiscal year’s balance of payments gap. Finance Minister Ishaq Dar has been saying it should be around USD 5 billion.

The deal will also unlock other bilateral and multilateral financing avenues for Pakistan to shore up its foreign exchange reserves, which have fallen to four weeks’ worth of import cover, reported Geo News.

Kozack was further asked about the status of talks with Pakistan. She replied, “discussions were ongoing between IMF staff and the Pakistani authorities toward an SLA on policies to complete the ninth review of Pakistan’s extended Fund Facility (EFF).”

“Pakistan’s economy faces multiple challenges, including slowing growth, high inflation, and large financing needs. And of course, this is all coming on the back of devastating floods,” she asserted. 

With enough foreign reserves to only cover about four weeks of necessary imports, Pakistan is desperate for the IMF agreement to disperse a USD 1.1 billion tranche from a USD 6.5 billion bailout agreed upon in 2019.