Pakistan Secures Initial Relief of $3 Billion from IMF in its Bid to Avoid Default

Pakistan Secures Initial Relief of $3 Billion from IMF in its Bid to Avoid Default

Ira Singh
30 June’23

In a significant development, Pakistan has successfully secured an initial relief package of $3 billion from the International Monetary Fund (IMF) as part of its ongoing efforts to avoid a potential sovereign default. The financial support comes at a critical time when the country faces mounting economic challenges and seeks to stabilize its fragile economy.

The agreement, reached after intense negotiations between Pakistani authorities and the IMF, is seen as a lifeline for the nation, which has been grappling with a growing external debt burden and a widening current account deficit. The IMF’s assistance is expected to provide immediate relief and help alleviate some of the economic pressures that Pakistan has been facing in recent months.

The country will now hope to secure the funding of at least $1.1 billion from the IMF, after a final review. The development occurs right before the expiration of IMF’s current programme for Pakistan on June 30, according to sources.

Under the terms of the agreement, Pakistan will be required to implement a series of economic reforms and measures aimed at improving its fiscal discipline, enhancing revenue generation, and promoting sustainable growth. The financial support from the IMF is also likely to encourage other international financial institutions and bilateral partners to extend their support to Pakistan. The country has been actively engaging with various stakeholders to secure additional financial assistance and investment to strengthen its economy and pave the way for sustainable development.

The agreement aims to support Pakistan’s purported efforts to stabilise the economy from recent external shocks, preserve macroeconomic stability and provide a framework for financing from multilateral and bilateral partners. “The new SBA will also create space for social and development spending through improved domestic revenue mobilisation and careful spending execution to help address the needs of the Pakistani people,” the IMF said in an official statement.

According to an IMF statement, the Executive Board’s consideration for $3 billion loan programme towards Pakistan is likely to take place in the middle of July.

The IMF on Friday said that a steadfast policy implementation will be key for Pakistan to overcome its current challenges, “including through greater fiscal discipline, a market-determined exchange rate to absorb external pressures, and further progress on reforms, particularly in the energy sector, to promote climate resilience, and to help improve the business climate.”

The news of Pakistan securing the initial relief of $3 billion from the IMF has been welcomed by economists and market observers, who believe that it will provide a much-needed respite for the country’s economy. However, they caution that sustained efforts and prudent economic management will be crucial for Pakistan to overcome its economic challenges and achieve sustained growth in the long run.

As Pakistan moves forward with its reform agenda, the international community will closely monitor the implementation of measures and progress made by the country. The successful implementation of reforms will not only help Pakistan avoid a sovereign default but also position it on a path towards sustainable economic growth, improved living standards, and increased investor confidence.

Follow up
Pakistan has availed nearly two dozen bailouts from the Washington-headquartered lender since 1952, according to sources.