The International Monetary Fund (IMF) has made an agreement with Pakistan to provide the cash-strapped country with $3 billion.
The long awaited agreement offers Pakistan some relief from its economic crisis.
After the deal was announced early Friday, June 30, 2023, Finance Minister of Pakistan, Ishaq Dar tweeted, “Praise be to God.”
The proposed package is higher than what Pakistan had anticipated. The nation was awaiting the release of the remaining $2.5 billion from a 2019 bailout package of $6.5 billion that expires on Friday.
The nine-month agreement must be approved by the IMF’s Executive Board, which is expected to make a final decision in mid-July.
In a statement, Nathan Porter, the IMF’s mission chief to Islamabad, noted that the new agreement builds on the 2019 program. He also noted that Pakistan’s economy has experienced a number of external shocks, such as the disastrous floods in 2022 that claimed 1,739 lives, left $30 billion in damage, and had an impact on millions of Pakistanis. In the wake of Russia’s war in Ukraine, the nation was also negatively impacted by a rise in global commodity prices.
Porter iterated that despite the authorities’ efforts to reduce imports and the trade deficit, reserves have declined to very low levels and liquidity conditions in the power sector also remain acute.
“Given these challenges, the new arrangement would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead.”
Nathan Porter, the IMF’s mission Chief to Islamabad
Porter stressed that over the past few days, the Pakistani authorities had “taken decisive measures to bring policies more in line with the economic reform program supported by the International Monetary Fund,” including Parliament passing a revised budget.
According to Mohammad Sohail, prominent Economist and Head of Topline Securities, there were a lot of uncertainties about what would happen after June, especially with a new government coming to power in a few months. “Now this funding of 3 billion dollars for nine months will definitely help restore some investors’ confidence,” Sohail said.
Sharif Expresses Confidence That Agreement Will Boost Economic Growth
Also on Friday, Prime Minister of Pakistan, Shehbaz Sharif tweeted that the arrangement will help strengthen Pakistan’s foreign exchange reserves, enable the country to achieve economic stability, and put the country on the path of sustainable economic growth.
Sharif expressed appreciation for the efforts and hard work of Finance Minister Ishaq Dar towards achieving the outcome. He also thanked IMF Managing Director, Kristalina Georgieva and her team at the IMF for their cooperation and collaboration.
Pakistani government is struggling to avoid a default with financial help from friendly countries such as China, Saudi Arabia and the United Arab Emirates. It has also been embroiled in an unprecedented economic crisis since Sharif replaced Imran Khan, who was ousted in a no-confidence vote in Parliament last year.
The deal between the IMF and Pakistan comes days after Prime Minister Shehbaz Sharif spoke with Kristalina Georgieva, the Managing Director of the IMF, on Tuesday, June 27, 2023. The two also met on June 22, 2023 on the sidelines of a global finance meeting in Paris.
Talks between Pakistan and the IMF had stalled in December after the global lender delayed the release of a crucial tranche of $1.1 billion from the bailout originally signed in 2019 by Sharif’s predecessor, Imran Khan.
Pakistan and the IMF have been at odds over what the fund says is Islamabad’s unsatisfactory compliance with the bailout conditions. Pakistan says it has fully complied with the conditions.
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