Pakistan Receives $700 Million Loan From IMF Amid Economic Crisis: Report
Islamabad: Pakistan has received a $700 million loan from the International Monetary Fund (IMF) in an effort to address its economic crisis, according to a report by Geo News. The loan was granted as part of the IMF’s bailout program, with the total disbursements under the $3 billion Standby Arrangement (SBA) reaching approximately $1.9 billion after the IMF Executive Board completed its first review last week.
Antoinette Sayeh, Deputy Managing Director and Chair, expressed cautious optimism, stating, “There are now tentative signs of activity picking up and external pressures easing.” The nine-month SBA, approved by the Executive Board in July, aims to provide a policy anchor for addressing both domestic and external balances and establish a framework for financial support from multilateral and bilateral partners.
However, securing the bailout required Pakistan to implement stringent measures as requested by the IMF. These measures included a revamped budget, a record interest rate hike, and significant increases in electricity and gas prices. Additionally, the IMF required Pakistan to raise $1.34 billion in new taxation to meet fiscal adjustments. While these steps were taken, they also contributed to a record-high inflation rate of 38% year-on-year in May, which remains above 30%.
With the approval of the IMF loan, analysts anticipate that Pakistan will be able to secure additional multilateral and bilateral loans. Furthermore, the United Arab Emirates (UAE) has rolled over two $1 billion deposits, which were maturing soon, providing some relief to Pakistan.
The approval from the IMF follows a staff-level agreement reached between the organization and Pakistan in November 2023, highlighting the nation’s commitment to implementing key reforms. The current IMF program, totaling $3 billion, is scheduled to conclude in April 2024, with approximately $8 billion yet to be disbursed. The IMF released the first tranche of $1.2 billion in July.
Pakistan’s finance Ministry officials expressed confidence in meeting the IMF targets, noting that the country diligently implemented the recommended economic reforms. The agreement with the IMF supports Pakistan’s commitment to fiscal consolidation, energy sector reforms, market-determined exchange rates, and governance reforms to attract investment and stimulate job creation while strengthening social assistance.
However, Pakistan’s overall debt burden has soared to PKR 63.399 trillion ($390 billion) by the end of November 2023, according to an official report. This represents an increase of over PKR 12.43 trillion ($76.6 billion) during the tenure of the PDM and caretaker government. The country’s debt includes PKR 40.956 trillion ($252 billion) in domestic loans and PKR 22.434 trillion ($138 billion) in international loans.
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