IMF Deal
LONDON: Federal Minister for Finance and Revenue, Muhammad Aurangzeb, recently hosted a delegation from the International Monetary Fund (IMF), led by IMF Mission Chief Mr. Nathan Porter.
The meeting, held on May 13, 2024, at the Finance Ministry, marked the commencement of discussions on further engagement with the Fund.
Notable attendees included the Governor of the State Bank of Pakistan, the Chairman of the Federal Board of Revenue, and senior officials from the Finance Ministry.
Minister Aurangzeb extended a warm welcome to the IMF team, expressing gratitude for the successful completion of the Standby Arrangement (SBA).
During the meeting, he apprised the IMF team of the significant improvement in macroeconomic indicators observed throughout the duration of the SBA.
Furthermore, he reiterated the government’s steadfast commitment to continue and expand upon the reform agenda aimed at bolstering Pakistan’s economic resilience and stability.
In parallel, Citi, a prominent Wall Street bank, has expressed optimistic anticipation regarding Pakistan’s forthcoming agreement with the IMF.
Citi expects Pakistan to finalize a new four-year program with the IMF, potentially amounting to up to $8 billion, by the end of July.
This expectation follows Pakistan’s recent completion of a short-term $3 billion Stand-By Arrangement with the IMF, signaling Islamabad’s intention to secure a longer-term program to effectively address its economic challenges.
Nikola Apostolov, an analyst at Citi, emphasized the positive outlook for Pakistan’s Eurobonds, particularly highlighting the appeal of the country’s 2027 international bond.
Apostolov’s optimism is rooted in the potential for a larger and longer IMF Extended Fund Facility (EFF) program, projected to reach $7-8 billion over a four-year period, alongside the prospect of increased Saudi investments.
Citi’s assessment is based on discussions held during a visit to Pakistan, where their team engaged with policymakers, including Finance Minister Muhammad Aurangzeb.
Citi’s positive projections align with the IMF mission visit to Pakistan. This visit aims to initiate discussions concerning the financial year 2025 budget, policy reforms, and potential initiatives under a new program.
The overarching objective, as articulated by IMF Resident Representative Ether Perez Ruiz, is to foster improved governance and bolster economic growth for the benefit of all Pakistanis.
Furthermore, Citi identified investment opportunities in Pakistan’s international 2027 bond, noting its attractiveness to investors due to liquidity and substantial upside potential as default risks diminish.
Currently trading at 87.292 cents in the dollar, the 2027 maturity presents investors with an advantageous entry point. Additionally, shorter-dated bonds maturing in 2025 and 2026 have experienced significant appreciation since late last year, trading between 91 and 96 cents.
This marks a notable improvement compared to the lows observed in 2022 when Pakistan’s international bonds traded as low as the mid-20 cents range.
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