Tag: multilateral lenders

  • IMF greenlights $700 million for Pakistan’s economic stabilisation programme

    IMF greenlights $700 million for Pakistan’s economic stabilisation programme

    In a significant development, the International Monetary Fund (IMF) successfully concluded its first review of Pakistan’s economic reform programme on Thursday.

    This programme, backed by a $3 billion and-by a arrangement (SBA), has now received a boost with the immediate approval and disbursement of $700 million, as confirmed by the finance ministry.

    According to an official statement from the ministry, the completion of the first review by the IMF’s Executive Board, coupled with the payment of $528 million in special drawing rights, has elevated the total disbursements under the SBA to $1.9 billion.

    The infusion of funds from the IMF, combined with recent inflows from multilateral lenders, is anticipated to contribute to the stability of the Pakistani rupee, which has demonstrated relative steadiness over the past few months.

    The finance ministry highlighted that this fresh tranche would play a crucial role in facilitating rollovers from allied countries, including the United Arab Emirates, China, and Saudi Arabia.

    Additionally, it is expected to alleviate external debt repayment pressures faced by Pakistan.

    This positive development traces back to June 2023, when the IMF Executive Board granted approval for a much-needed nine-month arrangement with Pakistan to support its economic stabilisation program.

    The initial disbursement of $1.2 billion was promptly released in July, with the remainder subject to two quarterly reviews over the programme’s duration.

    The current IMF programme is slated to conclude in the second week of April, with the recent disbursement marking a significant step towards its successful execution.

    Notably, a staff-level agreement was reached in November 2023 between the IMF staff and Pakistani authorities, paving the way for the first review under Pakistan’s SBA.

    This agreement was contingent upon subsequent approval by the IMF’s Executive Board.

    Looking ahead, Pakistan is poised to receive the remaining amount in March under the $3 billion SBA.

    Despite facing challenging conditions, particularly persistently high inflation, which rose to 29.7 per cent in December from 29.2 per cent in the preceding month, Pakistan remains committed to navigating through these economic challenges with the assistance of international financial institutions.

  • Pakistan could default after June as country fails to meet some IMF conditions

    Pakistan could default after June as country fails to meet some IMF conditions

    Pakistan is in the midst of a balance of payment crisis, and the stakes are high. Without the financial aid of the International Monetary Fund (IMF), the country faces the prospect of defaulting on its external payment obligations.

    Unfortunately, reports say that the IMF is not convinced by the assurances given to them by Pakistan’s friendly countries.

    Officials of the finance ministry, speaking anonymously, have confirmed that Pakistan has fulfilled several conditions set by the lender for the revival of the loan facility, and the staff-level agreement on the ninth review was supposed to be signed by February 9.

    However, the delay in the IMF programme could have severe repercussions. The budget planning, which is expected to be tabled in the second week of June, is likely to be affected.

    Moody’s Investor Service has warned that Pakistan may default if it does not receive a bailout from the IMF as its financing options beyond June are uncertain.

    While Pakistan is expected to meet its external payments until the end of this fiscal year in June, its reserves are weak and without IMF support, it could default.

    Pakistan is struggling to restart a stalled $6.5 billion bailout programme from the IMF due to the government’s failure to meet some loan conditions, and political tensions ahead of elections are adding to the risk of a delay in the loan.

    An engagement with the IMF beyond June would support additional financing from other multilateral and bilateral partners, which could reduce default risk. Pakistan’s foreign-exchange reserves remain very low, standing at $4.5 billion, and sufficient to cover only about one month of imports.

    S&P Global Ratings estimates that Pakistan’s gross external financing needs as a proportion of current-account receipts plus usable reserves will rise to 139.5 per cent in fiscal year 2024 from 133 per cent in 2023.

    S&P analysts believe that an IMF programme would be a foundation for important fiscal policy reforms and that an agreement on the current review cycle could instill more confidence for other bilateral and multilateral lenders to Pakistan.