Pakistan Gets Initial Approval For Final $1.1 Billion IMF Payout
Pakistan also expressed interest in a successor medium-term program, Mission Chief to Pakistan Nathan Porter said.
(Bloomberg) -- Pakistan secured initial approval from the International Monetary Fund for the release of the final tranche from a $3 billion bailout program and has expressed interest in another loan program to keep the economy going.
The staff-level agreement for the second review of the program gives the nation access to a payout of about $1.1 billion — subject to approval from the IMF’s executive board, the Washington-based lender said in a statement on Wednesday. Pakistan also expressed interest in a successor medium-term program, Mission Chief to Pakistan Nathan Porter said in the statement.
“Pakistan’s economic and financial position has improved in the months since the first review,” IMF said in a statement. “However, growth is expected to be modest this year and inflation remains well above target, and ongoing policy and reform efforts are required to address Pakistan’s deep-seated economic vulnerabilities.
The South Asian country succeeded in averting a sovereign default last year, but it remains heavily reliant on IMF aid with $24 billion in external financing needs in the fiscal year starting July, about three times its foreign exchange reserves. Now investors’ attention will turn to negotiations for a fresh package as Pakistan had planned to seek a new loan of at least $6 billion from the IMF, Bloomberg News earlier reported.
Pakistan dollar bonds rose to their highest level since March 2022. IMF aid has helped boost sentiment for the nation’s dollar bonds, which handed investors a gain of more than 20% this year, the top performer in emerging markets after Ecuador.
New Goals
Prime Minister Shehbaz Sharif, who was sworn in this month after a controversial election, has directed authorities to fasttrack negotiations with the IMF for a new facility.
The new loan program will aim to permanently resolve Pakistan’s fiscal and external sustainability weaknesses and lay the foundations for sustainable growth, Porter said after discussions in Islamabad. While these discussions are expected to start in the coming months, the IMF said the key objectives are expected to include broadening the tax base, improving debt sustainability and restoring the energy sector’s viability.
Pakistan’s authorities are determined to deliver a primary balance target of 0.4% of GDP and continue with the timely implementation of power and gas tariff adjustments, Porter said.
The State Bank of Pakistan has said it remains committed to maintaining a prudent monetary policy to lower inflation and ensure exchange rate flexibility and transparency in the operations of the FX market.
(Updates with details from statement throughout, bond reaction)
More stories like this are available on bloomberg.com
©2024 Bloomberg L.P.
