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IMF Approves Approved $1.1 Billion Final Loan Tranche For Pakistan
(CTN News) – On Monday, the International Monetary Fund (IMF) concluded its final assessment of Pakistan’s economic reform program, which was backed by a $3 billion Stand-By Arrangement (SBA). As a result, they approved the immediate release of $1.1 billion.
This milestone follows last month’s agreement between Pakistani authorities and the IMF on the SBA’s second and final review. The agreement awaited approval from the IMF’s Executive Board.
In its statement, the IMF announced, “Today, the Executive Board of the International Monetary Fund completed the second and final review of Pakistan’s economic reform program supported by the IMF’s Stand-By Arrangement.
The Board’s decision allows for an immediate disbursement of SDR 828 million (approximately $1.1 billion), bringing total disbursements under the arrangement to SDR 2.250 billion (about $3 billion).”
With this update, Pakistan now has access to the remaining $1.1 billion under the SBA, marking the completion of the 9-month arrangement.
“The completion of the second and final review reflects the authorities’ stronger policy efforts under the SBA, which have supported the stabilization of the economy and the return of modest growth,” the IMF stated.
“To transition Pakistan from stabilization to a robust and sustainable recovery, the authorities must persist in their policy and reform endeavors, including adhering strictly to fiscal targets while safeguarding vulnerable groups; adopting a market-determined exchange rate to absorb external shocks; and expanding structural reforms to foster stronger and more inclusive growth,” added the Bretton Woods institution.
Pakistan is now aiming to secure a larger and longer-term Extended Fund Facility (EFF) from the IMF program to achieve macroeconomic stability in the country.
“IMF Approves $1.1 Billion Last Loan Tranche, Concluding Second Bailout Package for Pakistan”
According to state-run APP, Prime Minister Shehbaz Sharif met with IMF Managing Director Kristalina Georgieva on Sunday during the World Economic Forum Special Meeting in Saudi Arabia. He reaffirmed his government’s commitment to revitalizing Pakistan’s economy.
During the meeting, Shehbaz Sharif informed the IMF’s MD that he had instructed his financial team, headed by Finance Minister Muhammad Aurangzeb, to implement structural reforms, enforce stringent fiscal discipline, and pursue prudent policies aimed at ensuring macroeconomic stability and sustained economic growth.
Both parties also discussed the possibility of Pakistan entering into another IMF program to solidify the progress made in the past year and to maintain a positive economic growth trajectory.
IMF’s Assessment and Recommendations for Pakistan’s Economic Stability
Following the Executive Board’s discussion, Antoinette Sayeh, Deputy Managing Director and Chair, stated, “Pakistan’s determined policy efforts under the 2023 Stand‑By Arrangement have brought progress in restoring economic stability.”
She noted that moderate growth had resumed, external pressures had eased, and although still high, inflation had started to decrease.
Sayeh emphasized the importance of Pakistan capitalizing on this achieved stability by continuing to implement sound macroeconomic policies and structural reforms to foster stronger, inclusive, and sustainable growth.
She also stressed the critical role of continued external support.
Furthermore, Sayeh mentioned that Pakistani authorities had managed to stabilize the circular debt in the energy sector throughout the SBA period through timely tariff adjustments and improved collection efforts.
The IMF official emphasized the importance of continuing these measures, while also stressing the critical need for the authorities to undertake cost-side reforms to address the underlying issues and viability of the sector.
Regarding monetary policy, the official stated that the State Bank of Pakistan’s (SBP) tight stance remains appropriate until inflation returns to more moderate levels.
This was reaffirmed as the central bank maintained the key interest rate at 22% for the seventh consecutive meeting on Monday.
The IMF official highlighted the necessity to continue rebuilding foreign exchange reserves, which stood at $7.981 billion as of April 19, under the SBA.
Moreover, the official stressed the need for stronger action to address undercapitalized financial institutions and to maintain vigilance over the financial sector to ensure stability.
IMF’s $3 Billion Stand-By Arrangement (SBA) for Pakistan: Key Focus Areas
The IMF approved the $3 billion SBA for Pakistan in July 2023. According to the lender, the program focused on several key areas:
- Implementing necessary fiscal adjustments and maintaining debt sustainability through the FY24 budget implementation.
- Safeguarding critical social spending.
- Mitigating external shocks and eliminating foreign exchange shortages by restoring proper functioning of the FX market.
- Continuing progress on disinflation by adhering to a tight monetary policy.
- Advancing structural reforms, particularly in the energy sector viability, state-owned enterprise (SOE) governance, and climate resilience.
