The IMF agreed to inject $3 billion into the country’s struggling economy after months of negotiations that pushed the country to the brink of default
Release date – Friday 23rd – 11:30pm – June 30th
Islamabad: The International Monetary Fund has agreed to inject $3 billion into the country’s struggling economy, a major relief for cash-strapped Pakistan, after months of negotiations that pushed Pakistan to the brink of default.
The Pakistani government and the Washington-based global bank on Thursday agreed a nine-month standby arrangement (SBA) to support immediate actions by authorities to stabilize the economy from external shocks.
Pakistan is facing its worst economic crisis since it gained independence from Britain in 1947. The country’s economy has been in free fall for years, putting immeasurable pressure on the poor in the form of unchecked inflation, making economic recovery almost impossible for Pakistan. The majority of the people sustain their livelihoods.
Pakistani Prime Minister Shebaz Sharif said on Friday that the staff-level agreement with the International Monetary Fund will help strengthen Pakistan’s foreign exchange reserves and bring the country economic stability.
“I am pleased to announce that Pakistan has reached a staff-level agreement with the IMF on a nine-month $3 billion stand-by arrangement,” he tweeted.
The deal came after an eight-month delay and still needs to be approved by the IMF board.
Earlier, Nathan Porter, head of the IMF mission in Pakistan, said a staff-level agreement was reached with Pakistani authorities on a nine-month Standby Arrangement (SBA) of SAR 2.25 billion. Payment rights (approximately US$3 billion, or 111 percent of Pakistan’s IMF quota) have been signed.
“The new SBA builds on the efforts of the authorities under Pakistan’s 2019 EFF support package, which is due to expire at the end of June. The agreement is subject to approval by the IMF Executive Board, which is expected The request will be considered by mid-week,” the statement added.
Finance Minister Ishaq Dar shared the IMF press release on Twitter with a message: “God may be praised”, which Planning Minister Ahsan Iqbal called “good news”. , and urged them to use this opportunity to turn the country around.
The nine-month $3 billion funding was higher than Pakistan’s expectations. The country is awaiting the release of the remaining $2.5 billion of the $6.5 billion rescue package agreed in 2019, which is due to expire on Friday.
“The new Small Business Administration will support immediate action by the authorities to stabilize the economy from near-term external shocks, maintain macroeconomic stability, and provide a financing framework for multilateral and bilateral partners,” the statement said.
Given the difficult challenges ahead, full and timely implementation of the plan is critical to its success, the report said.
The Pakistani parliament approved the fiscal year 2024 budget “in line with the objective of supporting fiscal sustainability and mobilizing revenues, which will help increase social and development spending,” the statement said.
With the fund imposing tough conditions and refusing to budge until the government meets them, Pakistan has had to bow to restrictions to get the loans.
Ultimately, Prime Minister Sharif had to intervene, and he had several interactions with IMF Managing Director Kristalina Georgieva to persuade lenders to approve the deal.
Annual inflation in Pakistan hit a record high of nearly 38% in May. Deadly clashes between supporters of former Pakistani Prime Minister Imran Khan and police also rattled financial markets.
Pakistan can barely manage its external liabilities, with its foreign exchange reserves hovering around $4 billion, while experts warn of a possible default in the coming months. With the IMF approving its policies, the country will receive multilateral and bilateral loans to build long-term reserves and programs.
The country’s economy has faced several challenges in recent years, including last year’s devastating floods and rising commodity prices following the Ukraine war.
Last year, floods in Pakistan killed more than 1,500 people, destroyed millions of homes, destroyed swaths of farmland and caused billions of dollars in economic losses.
