The International Monetary Fund (IMF) has approved a $700 million loan tranche to Pakistan by the IMF’s Executive Board after completing the first review of Pakistan’s economic reform program under a standby arrangement (SBA).
According to the Ministry of Finance, this disbursement is part of a larger $3 billion arrangement with the IMF, which had previously seen an initial tranche of $1.2 billion. This latest funding is expected to bolster Pakistan’s foreign exchange reserves substantially.
Impact on Pakistan’s Financial Stability
The receipt of the $700 million tranche is a critical step for Pakistan, particularly in light of its significant external financing needs, estimated at $25 billion. Financial expert Dr Khaqan Hasan Najeeb highlighted the importance of this development, noting that the funds from the IMF and additional flows from multilateral sources will not only support state banks’ reserves but also instil confidence in the market.
The financial assistance comes at a crucial time for Pakistan, which was on the brink of default before the SBA agreement with the IMF. The country’s total reserves have reached $13.2 billion, with the State Bank of Pakistan (SBP) holding $8.1 billion as of January 5.
As Pakistan approaches the second review under the IMF’s SBA, Dr. Najeeb emphasized the importance of meeting all set targets, including quantitative performance criteria, indicative targets, and structural benchmarks, by the end of December.
The successful completion of this review, scheduled to begin in February, is vital for securing the final tranche of the IMF loan. This process is integral to ensuring continued financial support and maintaining economic stability in Pakistan as the nation strives to meet its financial obligations and strengthen its economic standing on the global stage.