In a relief to cash-strapped Pakistan, the International Monetary Fund (IMF) on Wednesday gave the final nod to a long-awaited US$3 billion bailout program for the country to support the government’s efforts to stabilize its ailing economy. The development comes two weeks after the two sides reached a staff-level agreement on a “standby arrangement”.
“The Executive Board of the International Monetary Fund (IMF) has approved a 9-month standby arrangement (SBA) for Pakistan of SDR 2,250 million (about $3 billion or 111 percent of the quota) to support the authorities’ economic stabilization program,” the global lender said in a statement.
“The arrangement comes at a difficult economic moment for Pakistan. A difficult external environment, devastating floods and policy missteps have led to large fiscal and external deficits in fiscal 2023, rising inflation and eroded reserves,” the IMF said.
The Dawn newspaper reported that the approval allows for the immediate payment of US$1.2 billion. “The remaining amount will be spread over the duration of the program subject to two quarterly reviews,” he added.
The global lender said the program will focus on “implementing the FY24 budget to facilitate Pakistan’s necessary fiscal adjustments and ensure debt sustainability.” The development comes after Pakistan received $2 billion from Saudi Arabia and $1 billion from the UAE under the terms of the fund.
The new loan is expected to improve the country’s foreign exchange reserve and also open the door to multilateral credit agreements with institutions and countries.
The approval of the USD 3 billion Stand-by Agreement by the IMF Executive Board a little while ago is a big step forward in the government’s efforts to stabilize the economy and achieve macroeconomic stability,” Prime Minister Shehbaz Sharif said on Twitter.
“It strengthens Pakistan’s economic position to overcome immediate to medium-term economic challenges and gives the next government fiscal space to plan the way forward,” he said.
Pakistan’s economy has been in freefall for the past many years, bringing untold pressure on the poor masses in the form of rampant inflation, making it almost impossible for a large number of people to make ends meet.
Pakistan has struggled to secure enough foreign exchange to satisfy the IMF, which has refused to provide the remaining $2.5 billion of a $6.5 billion loan program that was signed in 2019 and expired on June 30 this year.
