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Friday May 24, 2024

Pakistan's debt sustainable, says IMF

IMF requires Pakistan to provide an assurance that its balance of payments deficit is fully financed for the fiscal year ending in June

By Web Desk
April 14, 2023
The International Monetary Funds (IMF) Managing Director, Kristalina Georgieva. Twitter
The International Monetary Fund's (IMF) Managing Director, Kristalina Georgieva. Twitter

Pakistan's debt remains sustainable, the International Monetary Fund's (IMF) Managing Director, Kristalina Georgieva said Friday as the nation faces one of its worst economic turmoils. 

The IMF statement comes after the Pakistani government announced it had met all requirements vital to receiving a critical $1.1 billion bailout from the international donor. 

The funds are part of a $6.5 billion bailout package approved by the Fund in 2019. The bailout package is deemed critical for Pakistan to avoid defaulting on external payment obligations.

However, the bailout's disbursement has been delayed since November due to concerns about Pakistan's fiscal policy adjustments. The country currently holds less than a month's worth of foreign exchange reserves, making the IMF's support crucial for the nation's economic stability.

Foreign exchange reserves held by the State Bank of Pakistan (SBP) fell by $170 million in the week ending on April 7 owing to external debt repayments, data released by the central bank showed on Thursday. The SBP said in a statement that its reserves stand at $4.03 billion, which is not enough to cover even a month’s imports. Central bank data showed forex reserves held by commercial banks stand at $5.5 billion while the country’s total reserves are $9.6 billion.

The IMF can only release the funds after Pakistan signs a staff-level agreement (SLA). Pakistan's finance ministry confirmed that IMF Deputy Managing Director, Antoinette Moniso Sayeh, was confident that the SLA would be signed soon. 

Georgieva, speaking at a briefing in Washington, also said that the international donor has been working tirelessly with Pakistani authorities to ensure that the country has the policy framework in place to prevent reaching unsustainable debt levels, reported by an international news agency.

When asked about Pakistan's potential to face unsustainable debt positions similar to those faced by countries like Sri Lanka, the IMF Managing Director responded, "It is best not to get there, and currently, we are not there yet."

"My hope is that we can complete our current programme successfully with the goodwill of everyone and the implementation of the agreements already made by the Pakistan authorities," Georgieva expressed optimism regarding the successful completion of the current programme.

In addition, the lender requires Pakistan to provide an assurance that its balance of payments deficit is fully financed for the fiscal year ending in June to unlock the next tranche of IMF funding. 

Pakistan's government has confirmed that it has fulfilled all requirements to receive the crucial bailout funds from the IMF. Following a meeting with IMF Deputy Managing Director Antoinette Moniso Sayeh, the government reiterated its successful completion of all international obligations, as stated in a news release by the finance ministry.

The IMF is also in discussions with friendly countries of Pakistan to provide financial assurances to complete the programme successfully. Georgieva expressed hope that, with goodwill and the implementation of the agreed-upon policies, the current programme would be completed successfully.