Pakistan is working to reach a staff-level agreement with the International Monetary Fund (IMF) as the organization seeks further assurances that Pakistan has fulfilled the condition of arranging $6 billion in financing.
Finance Minister Ishaq Dar and other high-ranking Pakistani officials attended the IMF Spring meetings in Washington, discussing the resumption of the loan program. Although Saudi Arabia has pledged $2 billion and the UAE has committed $1 billion in funds to Pakistan, the IMF still requires confirmation that the remaining $3 billion is secured.
Pakistan’s foreign exchange reserves have dwindled to cover only a month’s worth of imports after IMF funding stalled in November due to disagreements over fiscal policy adjustments. Resuming the bailout package of $6.5 billion, agreed upon in 2019, is essential for Pakistan to avoid defaulting on its external payment obligations.
The IMF program is expected to disburse another tranche of over $1 billion to Pakistan before it concludes in June. This funding will unlock additional bilateral and multilateral financing for the cash-strapped country, as loans from other multilateral agencies are contingent upon completing the IMF review.
IMF’s Director of the Middle East and Central Asia Department, Jihad Azour, highlighted the importance of addressing Pakistan’s economic imbalances and maintaining macroeconomic stability. He emphasized the need to tackle high inflation, which has surpassed 34%, and to maintain a flexible exchange rate to protect the Pakistani economy from external shocks.
Azour stated that the IMF had supported Pakistan over the years through various programs and will continue to work closely with the country’s authorities and bilateral supporters to ensure that the financing needs for the program and beyond are met. The decision to proceed with further reforms and programs in the future will be up to the Pakistani authorities, and the IMF stands ready to assist as needed.
