Pakistan is set to receive a $1.1 billion loan tranche from the International Monetary Fund (IMF) after a key meeting of the international lender’s executive board on Monday.
“The IMF Executive Board completed the second review under the Stand-By Arrangement (SBA) for Pakistan, allowing for an immediate disbursement of around $1.1 billion, bringing total disbursements under the arrangement to SDR 2.250 billion (about $3 billion),” the global lender said in a statement.
“Pakistan’s determined policy efforts under the 2023 SBA have brought progress in restoring economic stability. Moderate growth has returned; external pressures have eased; and while still elevated, inflation has begun to decline. Given the significant challenges ahead, Pakistan should capitalize on this hard‑won stability, persevering — beyond the current arrangement — with sound macroeconomic policies and structural reforms to create stronger, inclusive, and sustainable growth,” Antoinette Sayeh, IMF Deputy Managing Director and Chair, said.
“The authorities’ revenue performance, as well as federal spending restraint, helped achieve a sizeable primary surplus in the first half of FY2024, in line with program targets. Continued revenue mobilization efforts and spending discipline at both federal and provincial levels remain critical to ensure that the primary surplus target is achieved,” she added.
“Achieving strong, long‑term inclusive growth and creating jobs require accelerating structural reforms and continued protection of the most vulnerable through an adequately‑financed Benazir Income Support Program. Priorities include advancing the reform of state-owned enterprises (SOEs), including to ensure that all SOEs fall under the new policy framework; strengthening governance and anti‑corruption institutions; and continuing to build climate resilience.”
Key Points from IMF’s second and final review of Pakistan’s economic reform program
- The Executive Board of the IMF completed the review, allowing an immediate disbursement of $1.1 billion, bringing the total disbursements to $3 billion under the Stand-By Arrangement (SBA).
- The 9-month SBA, approved in July 2023, addressed domestic and external imbalances and provided financial support from various partners.
- The program focused on fiscal adjustment, social spending protection, external shock buffering, disinflation, and structural reforms, particularly in the energy sector, SOE governance, and climate resilience.
- Macroeconomic conditions improved with an expected growth of 2% in FY24, strengthening fiscal position, declining inflation, and increased gross reserves.
- Antoinette Sayeh praised Pakistan’s policy efforts for restoring economic stability, emphasizing the need for continued sound policies and reforms for sustainable growth.
- Revenue mobilization, spending discipline, energy sector reforms, monetary policy stance, FX market improvements, and structural reforms are highlighted as critical areas for Pakistan’s economic stability and growth.
IMF’s $1.1 billion tranche to help bring economic stability, says PM Shehbaz
The bailout program was announced following a meeting between Pakistani Prime Minister Shehbaz Sharif and IMF Managing Director Kristalina Georgieva on the sidelines of the World Economic Forum meeting in Riyadh on April 28.
Pakistan’s Prime Minister Shehbaz Sharif hailed the “immediate disbursement” of the final installment of the IMF loan, amounting to $1.1 billion, as a catalyst for bolstering economic stability.
Sharif emphasized the significance of the IMF agreement in averting default during his government’s 16-month tenure, underlining the difficult decisions made to secure Pakistan’s economic security. The infusion of funds marks a crucial milestone in Pakistan’s economic stabilization efforts, raising foreign reserves to over $14 billion.
“Receiving the last installment of 1.1 billion dollars from the IMF will bring more economic stability to Pakistan, ” PM Sharif said in a statement. “The agreement with the IMF was crucial in saving Pakistan from default during the 16-month government,” said Sharif, adding that he has made difficult decisions for the economic security of his country.
For over two years, Pakistan has faced a severe economic crisis, witnessing inflation spike to nearly 38% and foreign currency reserves dwindle to $3 billion by February 2023.
A World Bank report recently highlighted a concerning trend of rising poverty, with over 12 million Pakistanis falling below the poverty line in just the past year, leaving nearly 40% of the population grappling with economic hardship.