The International Monetary Fund (IMF) board approved the seventh and eighth revisions of Pakistan’s bailout program, allowing more than $1.1 billion to be released to the cash-strapped economy, the fund and the government said on Monday. The IMF agreed to extend the program by a year and increase total funding by 720 million Special Drawing Rights, or about $940 million at current exchange rates.
The funds will be a lifeline for the South Asian country suffering from devastating floods that the country’s planning minister says have caused at least $10 billion in damage. IMF Deputy Managing Director Antoinette Sayeh said in a statement that sticking to the planned increase in fuel levies and energy tariffs was “imperative” as Pakistan’s economy was “hit by adverse external conditions”. These include “spillovers from the war in Ukraine and domestic challenges, including accommodative policies that have led to uneven and unbalanced growth,” he noted. The floods were not mentioned in the fund’s statement. Pakistan’s foreign exchange reserves have fallen to a level that only covers a month of exports, and its economy is struggling with a massive current account deficit and high inflation. The fund announced the approval and the amount to be disbursed hours after Finance Minister Miftah Ismail announced the news via Twitter.
The Extended Fund Facility (EFF) program was originally for 36 months and was worth $6 billion at the time of its approval in 2019. It has stalled since the start of this year as Islamabad struggled to meet lender targets. The IMF Board also approved Pakistan’s request for a waiver due to the country’s failure to meet certain program criteria. Ismail also said that the government’s efforts to bring the program back on track through painful economic remedial measures saved Pakistan from insolvency. The IMF board’s approval will open up additional multilateral and bilateral financing avenues for Pakistan, which has been waiting for a clean bill of money from the lender.