Pakistan PM Shehbaz hopeful of IMF board approving loan agreement at review meeting

Shehbaz Sharif

Pakistan Prime Minister Shehbaz Sharif on Wednesday said he was hopeful that the IMF's executive board meeting on July 12 will approve the USD 3 billion nine-month bailout plan with his cash-strapped government and emphasised that the country was no longer under the threat of default.

Pakistan is hoping that the Washington-based lender will release the first tranche of USD 1.1 billion as part of the loan programme.

The Pakistan government and the International Monetary Fund (IMF) reached a long-awaited staff-level agreement on June 29 to inject USD 3 billion into the ailing economy after months-long negotiations that pushed the country to the brink of default.

Prime Minister Sharif acknowledged Finance Minister Ishaq Dar's effort in reaching a staff-level agreement with the IMF on a nine-month Stand-by Arrangement (SBA) in the amount of SDR 2,250 million (about USD 3 billion).

“Because of Ishaq Dar and his team’s efforts, on July 12, God willing in the board meeting, I am hopeful that it will be approved,” he was quoted as saying by The Dawn newspaper.

The USD 3 billion funding, spread over nine months, is higher than expected for Pakistan.

The country was awaiting the release of the remaining USD 2.5 billion from a USD 6.5 billion bailout package agreed in 2019, which expired on June 30.

The nine-month Stand-by Arrangement (SBA), if approved, will bring USD 3 billion, or 111 per cent of Pakistan’s IMF quota which will ease the country’s financial crisis.

Shehbaz also stated that he was “grateful” to the IMF Managing Director, Kristalina Georgieva, and her team, adding that this was Pakistan’s opportunity to move toward progress.

The prime minister reiterated that unlike the previous government and their “delays” concerning the conditions put forth by the IMF, the SBA was a nine-month-long programme and the government planned to complete it within the stipulated timeline, it said.

He said Pakistan was no longer under the threat of default.

Prime Minister Shehbaz said it was the government’s responsibility to rehabilitate the country’s economic conditions and to help it “stand on its feet”.

The initial disbursement is contingent upon the board's approval as the country continues to grapple with a severe balance of payments crisis and declining foreign exchange reserves.

Pakistan was absent from an earlier schedule released in June, igniting speculation that the Washington-based lender was not going to release funds from an earlier programme that expired on June 30.

Pakistan had earlier cleared eight of the 11 listed programme reviews, with the ninth review pending since November last year, the report said.

Meanwhile, Pakistan has submitted a letter of intent to the IMF, assuring the lender that no new tax amnesty will be introduced in the next nine months.

The letter, signed by Finance Minister Ishaq Dar and the State Bank governor, guarantees the removal of trade barriers and upholding commitments to other financial institutions and bilateral donors that have provided loans to the country, the report added.

Amidst the political turmoil, 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.

It 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.