IMF promises Pakistan ‘immediate’ release of $1.1bn loan after key meet

Cash-strapped Pakistan is poised to receive a $1.1bn loan tranche from the International Monetary Fund (IMF) after a key meeting of the international lender’s executive board on Monday, even as economists have warned that the country needs deep reforms to reduce its dependence on overseas financial assistance.

Late on Monday night, Pakistan’s Ministry of Finance and the IMF confirmed that the lender had approved the “immediate disbursement” of a $1.1bn tranche that completes a total loan of $3bn agreed to under a deal inked last year.

But the approval came with firm words from the IMF. “To move Pakistan from stabilization to a strong and sustainable recovery the authorities need to continue their policy and reform efforts, including strict adherence to fiscal targets while protecting the vulnerable; a market-determined exchange rate to absorb external shocks; and broadening of structural reforms to support stronger and more inclusive growth,” the organisation said in a statement.

The bailout followed 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 Sunday.

Sharif’s government had sought a new IMF deal after the current $3bn standby arrangement (SBA) with the global lender expired on April 11.

Hours after the IMF approved the funding, Sharif on Tuesday said disbursement will bring increased economic stability to Pakistan. The bailout from the IMF proved important to save the country from default, the country’s state broadcaster quoted the prime minister as saying.

Pakistan has been reeling from a severe economic crisis for more than two years, with its inflation at one point shooting up to nearly 38 percent and its foreign currency reserves depleted to $3bn in February 2023, enough to cover less than five weeks of imports.

In June last year, Sharif was able to avoid a sovereign default when he secured the IMF bailout, pushing the current forex reserves to almost $8bn, according to the latest central bank data.

 

Khaqan Najeeb, a former adviser to the Finance Ministry, told Al Jazeera the performance of Pakistan’s $350bn economy in the past nine months has shown that the country’s meagre foreign reserves have increased and that inflation, which was at 20 percent in March, has reduced, though slowly.

“Broadly, we can define Pakistan’s economic situation as macro-stabilisation, which is a consequent effect of adjustment policies, but it also means that growth is expected to remain slow and hover around 2 percent,” he said.

<<Aljazeera>>