Pakistan receives tranche of USD 700 mn from IMF amid economic crisis

ISLAMABAD: Under crisis, Pakistan has received USD 700 million from the International Monetary Fund (IMF) as part of its ballout programme, Geo News reported quoting State Bank of Pakistan (SBP) governor Jameel Ahmed on Wednesday.

The loan was approved after the IMF Executive Board completed its first review last week, bringing the total disbursements under the USD 3 billion Standby Arrangement (SBA) to about USD 1.9 billion.

Following the board’s approval last week, Antoinette Sayeh, Deputy Managing Director and Chair, said, “There are now tentative signs of activity picking-up and external pressures easing.”

The nine-month SBA approved by the Executive Board on July 12 last month, aims to provide a policy anchor for addressing domestic and external balances and a framework for financial support from multilateral and bilateral partners.

Geo News reported that to secure the bailout, Pakistan implemented tough IMF-requested measures: a revamped budget, a record interest rate hike, and painful increases in electricity and gas prices.

Under the bailout deal, the IMF also got Pakistan to raise USD 1.34 billion in new taxation to meet fiscal adjustments. The measures fueled all-time high inflation of 38% year-on-year in May, which is still hovering above 30%.

“The authorities took challenging steps to bring both electricity and natural gas prices closer to costs in 2023. Continuing with regularly-scheduled adjustments and pushing cost-side power sector reforms are vital to improving the sector’s viability and protecting fiscal sustainability,” Sayeh said.

As Pakistan has secured the IMF loan, analysts expect the struggling South Asian nation to secure more multilateral and bilateral loans.

In a statement, the SBP also confirmed that the United Arab Emirates (UAE) has rolled over two USD 1 billion deposits, which were maturing soon, providing respite to the friendly country.

“UAE has confirmed rollover of its two deposits of USD 1.0 billion each placed with State Bank of Pakistan for another one year which were maturing in January 2024,” the statement mentioned.

The IMF’s nod follows the staff-level agreement reached between the IMF and Pakistan on November 15, 2023, emphasising the nation’s commitment to implementing key reforms.

The current IMF programme of USD 3 billion is scheduled to end in the second week of April 2024, with around USD 8 billion remaining undisbursed. The IMD released its first tranche of USD 1.2 billion in July.

With the approval of the IMF board, Pakistan will receive a further installment of about 700 million US dollars. Officials in the Finance ministry said Pakistan has achieved all IMF targets and, ‘hopefully’, will be able to get the required results.

The officials said Pakistan strictly implemented the economic reforms as advised by the world body.

On November 16, last year, Pakistan and IMF reached a staff-level agreement on the first review under the SBA.

The agreement supports the authorities’ commitment to advance the planned fiscal consolidation, accelerate cost-reducing reforms in the energy sector, complete the return to a market-determined exchange rate, and pursue state-owned enterprise and governance reforms to attract investment and support job creation, while continuing to strengthen social assistance.

The total debt burden on Pakistan rose to a whopping 63,399 trillion Pakistani Rupees (PKR) by the end of November last year in the financial year 2023-24, ARY News reported citing an official report.

According to the report, the country’s total debt increased by over 12.430 trillion PKR during the tenure of the PDM and the caretaker government.

Pakistan’s overall debt burden surged to PKR 63.390 trillion including PKR 40.956 trillion in domestic loans and PKR 22.434 trillion in international loans.

The report stated further that the country’s overall debt stood at PKR 50.959 trillion in November 2022. The burden of the loan was recorded at PKR 63.390 trillion in November 2023, ARY News reported.