IMF approves $3 billion standby agreement for Pakistan

WASHINGTON: The International Monetary Fund (IMF) approved the standby agreement for Pakistan, a major boost for the cash-strapped country.

The Executive Board of the global financial institution held a key vote on Pakistan’s $3 billion bailout programme during a meeting in Washington. The Fund has approved the release of the first tranche of $1.2 billion immediately.

The global lender said that the programme would focus on the “implementation of the FY24 budget to facilitate Pakistan’s needed fiscal adjustment and ensure debt sustainability”. The approval allows for an immediate disbursement of $1.2 billion. “The remaining amount will be phased over the programme’s duration, subject to two quarterly reviews,” it added.

“The Executive Board of the International Monetary Fund (IMF) approved a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of SDR2,250 million (about $3 billion, or 111 percent of quota) to support the authorities’ economic stabilization program,” the IMF said in a statement.

It added the arrangement comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods and policy missteps have led to large fiscal and external deficits, rising inflation and eroded reserve buffers in FY23.

Islamabad signed a short-term IMF deal on June 30 under a standby arrangement to receive $3 billion over nine months. The government made last-ditch efforts to revive the programme pending for over eleven months.

Pakistan’s external financing environment has improved since then as Fitch Ratings upgraded the country’s credit rating by one notch to ‘CCC’ long-term foreign currency issuer rating this week.

Saudi Arabia has also deposited $2 billion into the account of the State Bank of Pakistan (SBP), a major development to ease the country’s fiscal turmoil. This was followed by S1 billion deposit by the United Arab Emirates (UAE) as part of its financial commitment to the IMF programme.

The IMF deal will unlock more bilateral and multilateral financing in addition to the money from Saudi Arabia. Finance Minister Ishaq Dar has said that he expects Pakistan’s foreign exchange reserves to rise to $15 billion by the end of this month.