New Delhi: The Pakistan government has indicated its interest in a new medium-term bailout plan, which could be up to $8 billion, to the International Monetary Fund (IMF), according to local media reports.
“The [Pakistani] authorities also expressed interest in a successor medium-term Fund-supported program with the aim of permanently resolving Pakistan’s fiscal and external sustainability weaknesses, strengthening its economic recovery, and laying the foundations for strong, sustainable, and inclusive growth,” the IMF said in a statement Wednesday.
“While these discussions are expected to start in the coming months, key objectives are expected to include: (i) strengthening public finances…(ii) restoring the energy sector’s viability…(iii) returning inflation to target, with a deeper and more transparent flexible FX market…(iv) promoting private-led activity through the above mentioned actions as well as the removal of distortionary protection,” it added.
The IMF had sent a team led by Nathan Porter, its mission chief to Pakistan, from 14 to 19 March for reviewing Islamabad’s economic programme supported currently by a Stand-by Arrangement (SBA).
Amid its ongoing economic crisis, with inflation still remaining above 20 percent (23.1 percent in February, according to the State Bank of Pakistan), Pakistan is expected to negotiate for an Extended Fund Facility (EFF) worth $8 billion from the IMF, according to Geo News.
Pakistan had last entered into an EFF with the IMF in July 2019, which was worth $6 billion. The 39-month programme expired in June 2023.
Not the first such SBA
In June 2023, Pakistan signed a nine-month SBA worth $3 billion with the IMF, which ends in March. The need for an SBA arises when countries face a balance of payments issue. Pakistan has required such SBAs at least 12 times since 1958 — highlighting the persistent nature of the economic issues facing Islamabad.
Overall, Pakistan and the IMF have signed 14 agreements since 1988.
On Wednesday, the IMF announced that it had reached a staff-level agreement with Pakistan, subject to approval of the IMF executive board for the release of about $1.1 billion worth of funds — the final tranche of funds under the current SBA.
A staff-level agreement is a preliminary agreement between the IMF and Pakistan, pending final approval from the IMF executive board. In this instance, the IMF executive board is expected to consider the staff-level agreement in late April.
“However, growth is expected to be modest this year and inflation remains well above target, and ongoing policy and reform efforts are required to address Pakistan’s deep-seated economic vulnerabilities amidst the ongoing challenges posed by elevated external and domestic financing needs and an unsettled external environment,” Porter said in a statement.
According to the State Bank of Pakistan (SBP), the country’s total external debts and liabilities as on 31 December 2023 stood at $131.159 billion. The total liquid foreign exchange reserves (forex) held by the SBP and its domestic banks stood at $12.593 billion in January 2024, according to provisional estimates published by the central bank.
Pakistan’s total forex reserves has grown by about $3 billion after the SBA agreement was struck with the IMF last year. A large portion of Pakistan’s external debt is owed to China, ThePrint reported in November last year.
Beijing has lent $68.91 billion to Islamabad between 2000 and 2021. A large portion of this amount — $33 billion — was during a three-year period between 2015 and 2017, when the Pakistan Muslim League-Nawaz (PML-N) was in power, according to AidData, a research lab at the US-based public research university College of William and Mary.
(Edited by Tony Rai)
Also Read: Arshad chaiwalla has 10 cafes opening in London. He wants to put Pakistan on the map