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Saturday May 25, 2024

IMF executive board to approve Pakistan’s $1.1 billion tranche next week

The funding will be second and last tranche of the $3 billion SBA

By Business Desk
April 24, 2024
IMF headquarters in Washington, US. — AFP/File
IMF headquarters in Washington, US. — AFP/File

The International Monetary Fund’s (IMF) executive board will hold its meeting on April 29 to review the approval of $1.1 billion funding for Pakistan under the $3 billion Stand-By Arrangement (SBA), Reuters news agency quoted the global lender as saying on Wednesday.

Pakistan and the IMF reached a staff-level agreement on March 20, 2024, after holding review talks from March 14 to 19 in Islamabad for the release of the second and last tranche of the short-term deal.

Pakistan had secured the SBA, which expires this month, in June last year to avert the looming default.

The News reported last week that Pakistan made formal request to the IMF for seeking the next bailout package in the range of $6 to $8 billion under Extended Fund Facility (EFF) with the possibility of augmentation through climate financing.

However, the exact size and time frame will only be determined after evolving consensus on the major contours of the next programme in May 2024.

Pakistan has shown its interest and also made a request to dispatch the IMF review mission in May 2024 to firm up details of the next bailout package of three years period under EFF programme.

A day earlier, Minister for Finance and Revenue Muhammad Aurangzeb ruled out the possibility of any “Plan B” and made it clear Pakistan would go for the longer and larger size of the IMF programme to implement the long-awaited structural reforms.

“There is no Plan B. Government will go for the longer and larger size of IMF programme, and then will turn into execution mode to jack up tax-to-GDP ratio, fixing cash bleeding of the energy sector, bringing reforms into SOEs and privatising PIA and other loss-making entities,” the minister for finance said.

If secured, it would be the 24th IMF bailout for Pakistan.

Pakistan faces a chronic balance of payment crisis, with nearly $24 billion to repay in debt and interest over the next fiscal year — three time more than its central bank's foreign currency reserves.

Pakistan's finance ministry expects the economy to grow by 2.6% in the current fiscal year ending June, while average inflation is projected to stand at 24%, down from 29.2% in fiscal year 2023/2024.

Inflation soared to a record high of 38% last May.