IMF loan helps Pakistan unlock another US$5.6 billion in funding

Improving finances will ease Pakistan into elections later this year. PHOTO: BLOOMBERG

Published Fri, Jul 14, 2023 · 04:57 PM

PAKISTAN is set to draw in US$5.6 billion in additional financing after securing a loan from the International Monetary Fund, a move seen as helping the South Asian nation avoid a default and boosting its foreign-exchange reserves.

The new funding includes US$3.7 billion of commitments from bilateral partners including Saudi Arabia and the United Arab Emirates, Nathan Porter, the IMF’s mission chief for Pakistan, said in an emailed response to Bloomberg News. Some US$3 billion has been disbursed, he said.

The IMF executive board approved the bailout loan programme of US$3 billion this week after months of delay, boosting Pakistan’s financial stability ahead of elections this year. Fitch Ratings upgraded Pakistan this week on the improving funding environment.

Prime Minister Shehbaz Sharif sealed the bailout programme after holding hour-long phone calls and several meetings with IMF Managing Director Kristalina Georgieva. Pakistan’s funding gap had been one of the outstanding issues for months before a previous programme lapsed in June.

The IMF loan programme also reflects US$400 million more than what would have been available under the previous programme, Porter said.

The nation has seen inflows of about US$4.2 billion this week alone that will almost double its reserves. More inflows are expected from multilateral development partners including the World Bank, Asian Infrastructure Investment Bank and Islamic Development Bank in the coming weeks and months, Bilal Kayani, Prime Minister’s coordinator on the economy said in a Twitter post.

Pakistan gets US$1 billion boost from UAE ahead of key IMF decision

The nine-month short-term lifeline for Pakistan’s ailing economy, which has been on the cusp of default, came after eight months of tough negotiations over fiscal discipline.

Pakistan optimistic of securing IMF approval for US$3 billion bailout

Finance Minister Ishaq Dar said Saudi Arabia deposited the funds with the central bank, boosting foreign exchange reserves when Pakistan had been left with barely enough to cover a month of controlled imports.

Pakistan receives US$2 billion in Saudi financial support

With sky-high inflation and foreign exchange reserves barely enough for a month of controlled imports, analysts say Pakistan’s economic crisis could have spiralled into a debt default in the absence of the IMF bailout.

Fitch upgrades Pakistan’s sovereign rating to CCC after IMF deal

Transport prices climb 20.30 per cent while food inflation rises 39.5 per cent in June from a year earlier, according to the Pakistan Bureau of Statistics' data.

Pakistan inflation eases in June amid record interest rates

Improving finances will ease Pakistan into elections later this year and Sharif has said he will hand over power to a caretaker government next month.

“This better-than-expected loan by the IMF will provide much needed stability to Pakistan at a time when Pakistan will see a transfer of power from one government to caretaker and then to a new government,” said Mohammad Sohail, chief executive officer at Topline Securities.

Pakistan’s assets have rallied with bonds gaining 40 per cent in the past month, while stocks surged about 9 per cent to become one of the top performers globally. BLOOMBERG

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