WASHINGTON: After the International Monetary Fund’s (IMF) Executive Board approved a new bailout package for Pakistan, an official from the Washington-based lender confirmed that the country has secured significant financing assurances from friendly nations. According to IMF Pakistan Mission Chief Nathan Porter, China, Saudi Arabia, and the United Arab Emirates have provided substantial financial support linked to Pakistan’s $7 billion Extended Fund Facility (EFF).
Porter stated that the financial assurances from these countries extend beyond the agreement to roll over $12 billion in bilateral loans owed to them. “I won’t go into the specifics, but UAE, China, and the Kingdom of Saudi Arabia all provided significant financing assurances joined up in this program,” Porter told reporters virtually.
These statements reflect the remarks made by Pakistan’s Finance Minister Muhammad Aurangzeb last month, wherein he claimed that the aforementioned countries had confirmed the rollover for three years, with renewal to take place every year.
The IMF’s Executive Board on Wednesday approved a new $7 billion, 37-month loan agreement for Pakistan. This agreement requires “sound policies and reforms” to strengthen macroeconomic stability. The approval releases an immediate $1 billion disbursement to Islamabad.
Pakistan, which has had 22 previous IMF bailout programs since 1958, is aiming for economic stabilization and growth. Porter highlighted the “really remarkable” economic turnaround the country has seen since mid-2023, noting significant reductions in inflation, stable exchange rates, and foreign reserves that have more than doubled. “So what we’ve seen is the benefits of undertaking good policies,” said Porter.
The IMF official emphasized the need for sustained growth by maintaining consistent monetary, fiscal, and exchange rate policies, increasing tax revenue, and improving public spending. Last year, Pakistan achieved its first primary budget surplus in 20 years, and the program calls for growing that surplus to 2% of gross domestic product (GDP). Porter indicated that this growth depends partly on reforms to enhance tax collections from under-taxed sectors, such as retailers.
The next review of the loan is likely to take place in March or April of 2025, based on end-2024 performance criteria, according to the IMF’s Pakistan mission chief. This upcoming review will assess Pakistan’s adherence to the agreed-upon economic policies and reforms to ensure continued financial stability and growth.
In summary, the IMF has confirmed that China, Saudi Arabia, and the UAE have provided substantial financial assurances to support Pakistan’s economic recovery. This support, combined with sound economic policies, is expected to help Pakistan achieve sustained growth and macroeconomic stability. The successful implementation of these policies and reforms will be crucial for Pakistan to maintain its economic momentum and fulfil its commitments under the IMF programme.
