On Friday, Finance Minister Muhammad Aurangzeb announced that the topic of an Extended Fund Facility with the International Monetary Fund will be discussed in Washington next month.
This comes as the nation aims to address a severe economic crisis. The existing $3 billion standby agreement with the global lender is set to expire on April 11, and both parties have recently reached a staff-level agreement concerning the release of the final tranche worth $1.1 billion.
“We have conveyed our significant interest in establishing an Extended Fund Facility (EFF) with the International Monetary Fund (IMF), although the specifics remain undetermined,” Aurangzeb mentioned during a media conference. He further highlighted that the IMF exhibited a highly receptive attitude towards the proposal.
In addition, the US has been “extremely supportive” in this regard, as per the minister’s statement. Following his re-inauguration, Prime Minister Shehbaz Sharif instructed his finance team to initiate the process of requesting an EFF from the IMF.
Yesterday, he stated that Islamabad required an additional financial assistance package from the Fund, connecting it to comprehensive structural and economic improvements.
He emphasized, “To achieve macro-level economic stability and progress, it has been decided that we cannot sustain without another IMF agreement.”
He emphasized that the recently inaugurated administration must focus on developing a medium-term plan, lasting approximately two to three years. Additionally, the International Monetary Fund (IMF) stated its willingness to assist in creating a new economic strategy for the nation, should they request such support.
Last summer, the international lender’s financial aid prevented Pakistan from facing a sovereign default. However, to obtain this assistance, the nation had to make significant adjustments, such as revising its budget, increasing interest rates, taxes, and energy prices. Consequently, the country experienced a substantial inflation rate of up to 38%, a historically depreciated currency, and a contraction in its economy during that period.
Bonds
Pakistan plans to seek assistance from international bond markets to strengthen its economy, as stated by Aurangzeb during today’s briefing. Additionally, he mentioned that efforts are being made on Panda bonds. Once the country’s credit rating enhances, they will venture into the global market for bonds.
The Finance Minister is eager to leverage Pakistan’s connection with China and has previously mentioned his interest in accessing the Chinese bond market. During a recent Bloomberg interview, he revealed that Pakistan intends to issue up to $300 million in Panda bonds this year.
