ISLAMABAD: The International Monetary Fund (IMF) Executive Board on Wednesday approved a $7 billion Extended Fund Facility (EFF) for Pakistan, with the first tranche of $1.1 billion likely to be released by September 30, 2024. This development follows the agreement reached between Pakistan and the IMF in July for a 37-month loan program.
Sources in the Ministry of Finance revealed that the interest rate on the loan is less than 5%, and the IMF is expected to disburse the second installment during this fiscal year. State Bank of Pakistan (SBP) Governor Jameel Ahmed confirmed that Pakistan has fulfilled all the IMF’s conditions and will receive the first tranche of $1.1 billion shortly.
Prime Minister Shehbaz Sharif hopes this will be the country’s last loan program with the IMF. The approval was contingent on the confirmation of $12 billion in bilateral loans from Saudi Arabia, China, and the UAE, as well as $2 billion in external financing. Pakistan owes $5 billion to Saudi Arabia in cash deposits, holds $4 billion in deposits from China, and $3 billion from the UAE.
To secure the IMF board’s approval, Pakistan was required to obtain $2 billion in external financing from bilateral and commercial lenders. The global lender identified an external financing gap of $2 to $2.5 billion. Confirmation was secured from Saudi Arabia in the form of a Saudi oil facility, a $400 million ITFC facility from the Islamic Development Bank (IsDB), and additional funds from Standard Chartered Bank and other Middle Eastern commercial banks, according to The News.
For years, Islamabad has relied heavily on IMF programs, often teetering on the brink of sovereign default and turning to countries like the UAE and Saudi Arabia for financial support to meet external financing targets set by the IMF.
This latest IMF bailout aims to stabilize Pakistan’s economy by addressing its fiscal and external imbalances, ensuring sustainable growth, and reducing reliance on foreign loans. However, the country will need to implement stringent economic reforms and maintain fiscal discipline to achieve these objectives and reduce its dependency on international financial assistance in the future.