Islamabad: Pakistan has secured a much-needed bailout package from the IMF, which will help the cash-starved country avert an imminent default, amidst the persisting political uncertainty and the devastating floods that has displaced over 33 million people.
The international lender approved the 7th and 8th tranche of USD 1.17 billion for Pakistan at an executive meeting in Washington on Monday.
Finance Minister Miftah Ismail said the International Monetary Fund’s Board had approved the revival of Pakistan’s Extended Fund Facility (EFF) programme.
“We should now be getting the 7th & 8th tranche of USD 1.17 billion. I want to thank the Prime Minister @CMShehbaz for taking so many tough decisions and saving Pakistan from default. I congratulate the nation,” tweeted Ismail, who had left no stone unturned to fulfil the hefty demands of the donor.
“The formal resumption of an IMF programme is a major step forward in our efforts to put Pakistan’s economy back on track. It is the outcome of an excellent team effort. I commend Finance Minister Miftah Ismail & his team and other stakeholders for their hard work,” Prime Minister Shehbaz Sharif said in a tweet.
In a statement, the IMF announced that the executive board completed the combined seventh and eighth reviews of the “extended arrangement” under the EFF for Pakistan.
“The board’s decision allows for an immediate disbursement of SDR 894 million (about USD 1.1 billion), bringing total purchases for budget support under the arrangement to about USD 3.9 billion,” it said.
It added that in order to support programme implementation and meet the higher financing needs in FY23, as well as “catalyse additional financing, the IMF Board approved an extension of the EFF until end-June 2023, rephasing and augmentation of access by SDR 720 million that will bring the total access under the EFF to about USD 6.5 billion”.
Pakistan and the IMF had signed the USD 6 billion deal in July 2019 but the programme was derailed in January 2020 and restored briefly in March last year before again going off the track in June.
The present government led by Sharif which assumed power in April this year after toppling Imran Khan’s government began an effort to revive the programme.
The global lender has also approved to increase the loan size to around USD 7 billion and extend it till June 2023.
“Pakistan is at a challenging economic juncture,” the IMF said in a statement.
“A difficult external environment combined with procyclical domestic policies fuelled domestic demand to unsustainable levels. The resultant economic overheating led to large fiscal and external deficits in FY22, contributed to rising inflation, and eroded reserve buffers,” it said.