ISLAMABAD: The International Monetary Fund executive board approved a $3 billion standby arrangement for Pakistan on Wednesday. The board of the IMF ordered an immediate disbursement of $1.2 billion for Pakistan.
IMF Press Statement
Today, the Executive Board of the International Monetary Fund (IMF) approved a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of SDR2,250 million (about $3 billion, or 111 percent of quota) to support the authorities’ economic stabilization program.
The arrangement comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods, and policy missteps have led to large fiscal and external deficits, rising inflation, and eroded reserve buffers in FY23.
Pakistan’s new SBA-supported program will provide a policy anchor for addressing domestic and external imbalances and a framework for financial support from multilateral and bilateral partners. The program will focus on (1) the implementation of the FY24 budget to facilitate Pakistan’s needed fiscal adjustment and ensure debt sustainability while protecting critical social spending; (2) a return to a market-determined exchange rate and proper FX market functioning to absorb external shocks and eliminate FX shortages; (3) an appropriately tight monetary policy aimed at disinflation; and (4) further progress on structural reforms, particularly with regard to energy sector viability, SOE governance, and climate resilience.
The Executive Board’s approval allows for an immediate disbursement of SDR894 million (or about US$1.2 billion). The remaining amount will be phased over the program’s duration, subject to two quarterly reviews.
After the IMF board’s approval, Pakistan would receive a $1.2 billion tranche from the IMF in the next few days. The IMF has referred the SBA with Pakistan to the board after signing a staff-level agreement a few days ago.
Earlier, Saudi Arabia and the United Arab Emirates deposited $3 billion into the State Bank of Pakistan’s account. Saudi Arabia deposited $2 billion on Tuesday while UAE deposited $1 billion on Wednesday evening.
With this development, the national foreign exchange reserves of Pakistan exceeded $12 billion on Wednesday.
Saudi Arabia and UAE deposited money under the external financial plan of the Pakistan government to unlock the IMF bailout program.
Last week, the government submitted a financing plan of $8 billion to the International Monetary Fund (IMF). The government submitted the plan ahead of the IMF board meeting on July 12. Before the board meeting, the IMF accepted the plan.
Meanwhile, China will provide financing up to $3.5 billion to Pakistan, underscoring its commitment to deepening strong bilateral relations in the economic, trade, and financial sectors.
China will roll over safe deposits of $2 billion and reschedule $1.5bn of commercial banks.
Notably, China’s support during the last few months when the country was facing difficult economic circumstances shows China’s commitment to deepening the relations between both countries.
Additionally, the Asian Development Bank (ADB) and the World Bank will contribute $500 million each.
Furthermore, the government will obtain $3 billion through the IMF program, signed between the International Monetary Fund (IMF) and Pakistan on June 30.
