Pakistan plans to seek a new loan of at least US$6 billion from the International Monetary Fund to help the incoming government repay billions of dollars in debt due this year, according to a Pakistani official. 

The South Asian nation will seek to negotiate an Extended Fund Facility (EFF) with the IMF, the official said, asking not to be identified as the discussions are private. Talks with the Washington-based lender are expected to start in March or April, the person said.

Pakistan is trying to avert an economic crisis after a contentious election that saw the nation’s two main political dynasties form a coalition to keep out of power the party of jailed former leader Imran Khan. Shehbaz Sharif, who’s been nominated as prime minister, said last week that negotiating a fresh IMF loan will be a priority for the new administration.

Pakistan’s Finance Ministry didn’t respond to a request for comment.

Pakistan faces US$25 billion of external debt payments in the fiscal year starting July, about three times its foreign-exchange reserves. The EFF loans are typically approved for three to four years to support policies to fix structural imbalances and are repaid after 4.5 to 12 years.

The main goals for the next IMF programme will include ensuring balance of payment and debt sustainability, privatising state-owned enterprises, and increasing tax revenues, said Tahir Abbas, head of research at Karachi-based Arif Habib Ltd. 

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“It will definitely be a strict and more focused programme than past ones,” he said. 

Investors have been watching the post-election developments closely, concerned that political uncertainty would hinder the nation’s ability to secure more funding, thereby increasing the risk of a debt default. Fitch Ratings said this week that failure to procure the loan would “increase external liquidity stress and raise the probability of default.”

Jailed leader Imran Khan will write to the IMF to ask the multilateral lender to carry out an independent audit of the contentious election results before it continues discussions with Pakistan, his lawyer Ali Zafar said. 

The IMF can’t give a loan to a country that failed to hold free and fair elections as this would “further burden the people,” Zafar told reporters outside the prison where Khan is serving time. 

Sharif, who was prime minister from 2022 until last year, had success in the past in negotiating funding with the IMF. He helped obtain a nine-month, US$3 billion loan under the fund’s Stand-By Arrangement in June. Pakistan has a final review under that loan programme, which could unlock about US$1.1 billion in funding before the facility expires in April. The nation has to repay a US$1 billion dollar bond in April.

For a new loan programme, the incoming administration would need to make a formal request to the IMF after it takes office. The amount of funding would depend on subsequent talks with the lender.   

The IMF said in a statement that it’s “available, if requested, to support the post-election government through a new arrangement to address Pakistan’s ongoing challenges.”

It also said the fund continues to talk with Pakistan about needed longer-term economic changes, including the best ways to bolster government revenues, improve the energy sector, liberalise the country’s exchange rate, overhaul state-owned enterprises and strengthen its resilience to climate shocks.

Pakistan has received 23 bailout packages from the IMF since gaining its independence in 1947, among the most of any country in the world. BLOOMBERG