On D-Day, IMF bails out Pakistan; 24th rescue in 75 years
By Our Special Correspondent
New Delhi, June 30: Pakistan has finally been bailed out by the International Monetary Fund one more time, agreeing at the staff level to extend a $3 billion for nine-month, which is 111 per cent of the quota of the Islamic nation. This is the 24th occasion that the IMF has bailed out Pakistan, while Nizam of Hyderabad with his loan of 200 million rupees had helped Islamabad to present the first budget in n1948.
An International Monetary Fund (IMF) staff team led by Nathan Porter held in person and virtual meetings with the Pakistani Authorities to discuss a new financing engagement for Pakistan under an IMF Stand-by Arrangement (SBA). “I am pleased to announce that the IMF team has reached a staff-level agreement with the Pakistani authorities on a nine-month Stand-by Arrangement (SBA) in the amount of SDR2,250 million (about $3 billion or 111 percent of Pakistan’s IMF quota). The new SBA builds on the authorities’ efforts under Pakistan’s 2019 EFF-supported program which expires end-June. This agreement is subject to approval by the IMF’s Executive Board, which is expected to consider this request by mid-July,” said Porter in a statement.
Since the completion of the combined seventh and eight reviews under the 2019 Extended Fund Facility (EFF) in August 2022, the economy has faced several external shocks such as the catastrophic floods in 2022 that impacted the lives of millions of Pakistanis and an international commodity price spike in the wake of Russia’s war in Ukraine, reasoned the IMF for bailing out Pakistan once more even while the economy of the Islamic nation is in a precarious situation, with mounting debt.
“As a result of these shocks as well as some policy missteps—including shortages from constraints on the functioning of the FX market—economic growth has stalled. Inflation, including for essential items, is very high. Despite the authorities’ efforts to reduce imports and the trade deficit, reserves have declined to very low levels. Liquidity conditions in the power sector also remain acute, with further buildup of arrears (circular debt) and frequent loadshedding,” added the IMF in a statement. The IMF further stated that the new SBA would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead. The IMF took note of Pakistan Parliament approving FY24 budget in line with the goals of supporting fiscal sustainability and mobilizing revenue, which will enable greater social and development spending. “The FY24 budget advances a primary surplus of around 0.4 percent of GDP by taking some steps to broaden the tax base and increase tax collection from undertaxed sectors, as well as improving progressivity, while ensuring space to strengthen support for the vulnerable through the BISP program. It will be important that the budget is executed as planned, and the authorities resist pressures for unbudgeted spending or tax exemptions in the period ahead,” added the IMF.
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