Cash-Strapped Pakistan Secures USD 3 Billion Loan from IMF – News18

The International Monetary Fund (IMF) on Wednesday announced that it has approved a USD 3 billion loan agreement for Pakistan, unlocking crucial funding for the cash-strapped economy. In a statement, the IMF said its executive board gave the green light to the nine-month standby arrangement “to support the authorities’ economic stabilization program.”

This follows a staff-level agreement between the fund and Pakistan announced last month, and the latest approval allows an immediate disbursement of around USD 1.2 billion. Pakistan Prime Minister Shehbaz Sharif lauded the USD 3 billion IMF deal as a “major step forward” in his government’s efforts to stabilise the economy and achieve macroeconomic stability.

“It bolsters Pakistan’s economic position to overcome immediate- to medium-term economic challenges, giving next government the fiscal space to chart the way forward,” he said in the tweet. “This milestone, which was achieved against the heaviest of odds & against seemingly impossible deadline, could not have been possible without excellent team effort,” he added.

In its press release, the global lender stated that the new programme would provide a policy anchor to Pakistan for addressing “domestic and external imbalances.”

“The programme will focus on (1) implementation of the FY24 budget to facilitate Pakistan’s needed fiscal adjustment and ensure debt sustainability while protecting critical social spending; (2) a return to a market-determined exchange rate and proper FX market functioning to absorb external shocks and eliminate FX shortages; (3) an appropriately tight monetary policy aimed at disinflation; and (4) further progress on structural reforms, particularly with regard to energy sector viability, SOE governance, and climate resilience,” the IMF added.

Pakistan has suffered from a balance-of-payments crisis as it attempts to service crippling external debt amid a fraught political environment — following the removal of the country’s former prime minister Imran Khan. Inflation has rocketed, the rupee has reached a record low against the dollar and the country is struggling to afford imports, causing a severe decline in industrial output.

Pakistan has brokered close to two dozen arrangements with the IMF, most of which have gone uncompleted. Prior to this announcement, Pakistan received USD 3 billion in deposits from Saudi Arabia and the United Arab Emirates (UAE).

The money from the two Gulf countries boosted Pakistan’s foreign reserves to USD 7.5 billion — more than double last week’s account balance.

(With agency inputs)