IMF approves much-awaited $3bn bailout for Pakistan, saving it from defaulting on debt

IMF grants nine-month standby arrangement to Pakistan to ‘support the authorities’ economic stabilisation programme’

File. A Pakistani money trader counts US dollars for a customer at a currency exchange office, in Karachi, Pakistan, Thursday, 19 May 2022 (Associated Press)

The International Monetary Fund (IMF) approved a much-awaited $3bn bailout package for Pakistan on Wednesday.

The IMF said in a statement that the executive board “approved a nine-month, stand-by arrangement for Pakistan for an amount of about $3bn to support the authorities’ economic stabilisation programme”.

The move comes at a crucial economic juncture for the South Asian nation and the bailout is expected to save the country from defaulting on its debt repayments.

“A difficult external environment, devastating floods, and policy missteps have led to large fiscal and external deficits, rising inflation, and eroded reserve buffers” in the fiscal year 2023, the IMF said in a statement.

“Pakistan’s new stand-by arrangement [SBA]-supported programme will provide a policy anchor for addressing domestic and external imbalances and a framework for financial support from multilateral and bilateral partners,” the IMF added.

Soon after the announcement was made, Pakistan prime minister Shehbaz Sharif tweeted: “It bolsters Pakistan’s economic position to overcome immediate to medium-term economic challenges, giving the next government the fiscal space to chart the way forward.”

He added: “This milestone, which was achieved against the heaviest of odds and against a seemingly impossible deadline, could not have been possible without an excellent team effort.

“I would commend finance minister Ishaq Dar and his team at the Ministry of Finance for their hard work. My special thanks are also due to Kristalina Georgieva, MD of IMF and her team for their support and cooperation.”

The global monetary agency said that the executive board’s approval allows for an immediate disbursement of about $1.2bn. “The remaining amount will be phased over the program’s duration, subject to two quarterly reviews.”

Meanwhile, the Dawn reported that the Pakistani rupee gained Rs 2.38 against the US dollar on Thursday.

The IMF approval on Wednesday comes following the deposit of $2bn by Saudi Arabia and $1bn by the United Arab Emirates into the State Bank of Pakistan. This move has significantly bolstered the foreign exchange reserves of Pakistan – which reports said has grown to $7.5bn — more than double its account balance last week.