Pakistan eyes release of up to $2.2bn as talks with IMF conclude

ISLAMABAD: Pakistan and the International Monetary Fund (IMF) successfully concluded the first review talks on Friday, paving the way for a staff-level agreement and the anticipated release of $2.2 billion under the Extended Fund Facility (EFF) and the augmentation of Climate Finance.

While both sides refrained from issuing an official statement immediately, it was agreed that the IMF would likely release a statement on Friday night or early Saturday. The Ministry of Finance will await the IMF’s official communication before making any public announcements.

Pakistan is expecting to receive $1 billion under the $7 billion EFF, with an additional $1billion to $1.2 billion expected to be approved by the IMF’s Executive Board through the augmentation of the Rapid Sustainability Facility (RSF). This would bring the total disbursement to approximately $2 billion to $2.2 billion, expected to be released after a six-week period following the Executive Board’s approval.

The two-week-long negotiations between Pakistan and the IMF resulted in a broader agreement on a revised framework for macroeconomic and fiscal adjustments for the current fiscal year. Key macroeconomic projections, including GDP growth, CPI-based inflation, and the current account deficit, were revised.

As a result of these adjustments, the size of Pakistan’s economy for the current fiscal year was revised downward from Rs123 trillion to Rs116.5 trillion. The real GDP growth projection was also revised downward, while the average CPI-based inflation was adjusted from 12.5 percent to 7 percent for the ongoing fiscal year.

Regarding the current account deficit (CAD), a surge in imports last month shifted the CAD from a surplus to a deficit of $0.4billion, primarily due to increased import demand ahead of Ramadan and Eid ul Fitr. However, the CAD is expected to remain in a slight surplus overall for the current fiscal year with the surplus reduced to $600 million.

Under the RSF, the Government of Pakistan has agreed to share a number of projects aimed at ensuring climate resilience initiatives. A dedicated fund will be established to finance and execute these projects in the coming years, aligning with the IMF’s climate finance objectives.

The successful conclusion of the review talks marks a significant step forward in Pakistan’s economic stabilisation efforts and its collaboration with the IMF to address fiscal challenges and promote sustainable development.