KARACHI: Following the approval of the IMF Executive Board of 37-month Extended Fund Facility amounting to US$7 billion, State Bank of Pakistan (SBP) has received the first tranche of SDR 760 million (equivalent to USD 1026.9 million) from the IMF on Friday.
These inflows will be reflected in SBP liquid reserves to be released on 3 Oct 2024.
Earlier in the day in New York, IMF Managing Director Kristalina Georgieva said that the newly approved bailout package for Pakistan aims to assist the country in economic recovery, reduce inflation, create jobs, and foster inclusive growth.
After meeting with Prime Minister Shehbaz Sharif, Georgieva stated on X (formerly Twitter) that they discussed Pakistan's new IMF-backed program, which supports economic recovery, disinflation, fairer taxation, and reforms to create jobs and promote inclusive growth.
This statement follows the IMF's approval of a $7 billion Extended Fund Facility (EFF), with the first tranche of $1.1 billion expected to be disbursed by September 30, 2024.
Pakistan’s economy has faced multiple crises, including the COVID-19 pandemic, the war in Ukraine, inflation, and devastating floods in 2022, pushing the country into a severe debt crisis. As foreign reserves dwindled, Pakistan turned to the IMF for assistance, initially securing an emergency loan in mid-2023.
The latest bailout includes loans linked to the government’s commitment to reforms, especially in expanding the tax base, as reflected in the recent tax-heavy budget. IMF Pakistan Mission Chief Nathan Porter confirmed that several allied countries have provided substantial financial assurances, complementing the agreement to roll over $12 billion in bilateral loans.
The Ministry of Finance noted that the loan’s interest rate is under 5%, and a second disbursement may happen within this fiscal year.
The key priorities under the EFF programme are to: (i) restore economic credibility and sustainability through sound macroeconomic policies and tax base expansion, (ii) implement reforms to enhance competition, productivity, and competitiveness, (iii) restructure state-owned enterprises (SOEs) and improve public services and the energy sector, and (iv) build resilience to climate change.
Prime Minister Shehbaz expressed satisfaction with the loan approval and thanked Georgieva and allied countries, including Saudi Arabia, China, and the UAE, for their support.
During his meeting with Georgieva, he reiterated Pakistan’s commitment to structural reforms and private sector development, and he praised the IMF’s technical support for strengthening institutions and economic management.
Georgieva emphasized the importance of maintaining macroeconomic stability and achieving inclusive, sustainable growth. Both leaders agreed to strengthen cooperation between Pakistan and the IMF.
