The Executive Board of the International Monetary Fund (IMF) has given the green light for a $1.1 billion loan to Pakistan, marking the final installment of a $3 billion Stand-by Arrangement (SBA).
In an official statement released on its website, the IMF stated, “The Executive Board of the International Monetary Fund (IMF) has completed the second and final review of Pakistan’s economic reform program supported by the IMF’s Stand-By Arrangement (SBA). This decision paves the way for an immediate disbursement of SDR 828 million (approximately $1.1 billion), bringing the total disbursements under the arrangement to SDR 2.250 billion (approximately $3 billion).”
Antoinette Sayeh, Deputy Managing Director and Chair, highlighted the progress Pakistan has made in restoring economic stability under the 2023 Stand-By Arrangement (SBA). She emphasized the importance of capitalizing on this stability through continued adherence to sound macroeconomic policies and structural reforms to foster stronger, inclusive, and sustainable growth. Sayeh stressed the need for ongoing external support.
The IMF underscored the appropriateness of the State Bank of Pakistan’s tight monetary policy stance until inflation returns to more moderate levels. It emphasized the importance of further enhancements in the functioning of the foreign exchange market and a market-determined exchange rate to bolster resilience against external shocks and attract financing for growth. Additionally, it called for sustained efforts to rebuild foreign exchange reserves and address undercapitalized financial institutions to ensure financial stability.
The loan, which is anticipated to be disbursed this week, represents the final tranche of a $3 billion Stand-By Arrangement (SBA) secured by Pakistan last summer to avert a sovereign default. This decision follows discussions during the IMF Executive Board meeting in Washington.
This development comes on the heels of Prime Minister Shehbaz Sharif’s meeting with IMF Managing Director Kristalina Georgieva in Riyadh, where they discussed Pakistan’s potential entry into another IMF program. Pakistan is seeking a new long-term Extended Fund Facility (EFF) after the current $3 billion Stand-By Arrangement (SBA) expires this month.
The country has formally requested an EFF bailout package ranging between $6 to $8 billion, with the possibility of augmentation through climate financing. However, the specifics regarding size and timeframe will be determined in May 2024 after consensus is reached on the major aspects of the program. Pakistan has expressed interest in dispatching an IMF review mission in May 2024 to finalize details of the three-year EFF program.
Finance Minister Aurangzeb has indicated that Islamabad aims to secure a staff-level agreement on the new program by early July. The loan is intended to support macroeconomic stability and implement overdue structural reforms, although specifics on the program size have not been disclosed.
If successful, this would mark Pakistan’s 24th IMF bailout. The $350 billion economy faces a persistent balance of payments crisis, with nearly $24 billion in debt and interest repayments due in the next fiscal year—three times more than its central bank’s foreign currency reserves. The Ministry of Finance expects the economy to grow by 2.6% in the fiscal year ending in June, with average inflation projected at 24%, down from 29.2% in the previous fiscal year.
IMF board to meet on April 29 to approve 1.1b disbursement for Pakistan
