In a major relief to cash-strapped Pakistan, the government and the IMF have reached a long-awaited staff-level agreement to inject $3 billion into the ailing economy after months-long negotiations that pushed the county to the brink of default.
Pakistan and the Washington-based global lender reached an agreement on Thursday to support the authorities’ immediate efforts to stabilise the economy from external shocks.
Pakistan’s economy has been in a free fall mode for the last many years, bringing untold pressure on the poor masses in the form of unchecked inflation, making it almost impossible for a vast number of people to make ends meet.
“I am pleased to announce that the IMF team has reached a staff-level agreement with the Pakistani authorities on a nine-month Stand-by Arrangement (SBA) in the amount of SDR 2,250 million (about $3 billion or 111 per cent of Pakistan’s IMF quota),” Nathan Porter, the International Monetary Fund’s Mission Chief to Pakistan, said in a statement on Thursday.
“The new SBA builds on the authorities’ efforts under Pakistan’s 2019 EFF-supported programme which expires at the end-June. This agreement is subject to approval by the IMF’s Executive Board, which is expected to consider this request by mid-July,” the statement added.
Finance Minister Ishaq Dar shared the IMF’s press release on Twitter accompanied by a message: “God may be praised”, Planning Minister Ahsan Iqbal called it “good news” and urged them to use the opportunity to turn around the country.
The $3 billion funding, spread over nine months, is higher than expected for Pakistan. The country was awaiting the release of the remaining $2.5 billion from a $6.5 billion bailout package agreed in 2019, which expires on Friday.
"The new SBA will support the authorities’ immediate efforts to stabilise the economy from recent external shocks, preserve macroeconomic stability and provide a framework for financing from multilateral and bilateral partners," the statement said.
The full and timely implementation of the programme will be critical for its success in light of the difficult challenges, it said.
The statement said that Pakistan's Parliament approved the FY24 budget “in line with the goals of supporting fiscal sustainability and mobilising revenue, which will enable greater social and development spending”.
Pakistan had to bend back to limits to get the loan as the fund put forward tough conditions and refused to budge until the government fulfilled them.
Ultimately Prime Minister Shehbaz Sharif had to intervene who had several interactions with IMF Managing Director, Kristalina Georgieva to persuade the lender to approve the deal.
Pakistan had been barely managing its external liabilities as its foreign reserves hovered around $4 billion while experts warned of default in coming months. With the IMF approving its policies, the country will get access to multilateral and bilateral loans to build its reserves and plan for a long time.
The country's economy has faced several challenges in recent times, including devastating floods last year and commodity price hikes following the war in Ukraine.
Over 1,500 people were killed last year during floods in Pakistan that destroyed millions of homes, wiped out swathes of farmland, and caused billions of dollars in economic losses.