Virendra Pandit
New Delhi: After months of severe cash crunch, supply crisis, and political uncertainties, Pakistan, where general elections to the National Assembly are due in October 2023, got a breather from the International Monetary Fund (IMF) which transferred a USD 1.2 billion bailout, the media reported on Thursday.
A day after the global lender approved a USD 3 billion bailout program, Pakistan has received USD 1.2 billion worth of the first tranche from the IMF, Finance Minister Ishaq Dar was quoted as saying.
The development came a fortnight after the two sides reached a staff-level agreement over the stand-by arrangement (SBA).
The IMF gave a final nod to the USD 3 billion bailout program on Wednesday to support the government’s efforts to stabilize the South Asian country’s ailing economy.
Dar told the media that when the SBA was finalized, it was decided that USD 1.2 billion would be given upfront while the “balance amount” of USD 1.8 billion would be handed over after two reviews in November 2023 and February 2024.
“I want to share the information that, as the upfront payment of USD 1.2 billion, the IMF has transferred the amount to the State Bank of Pakistan’s (SBP) account.”
He said the IMF’s Executive Board had approved the SBA with Pakistan and noted that this was a nine-month program under which Islamabad would receive USD 3 billion, the Dawn newspaper reported.
The global lender on Wednesday said the program would focus on the “implementation of the FY24 budget to facilitate Pakistan’s needed fiscal adjustment and ensure debt sustainability.”
“The arrangement comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods, and policy missteps have led to large fiscal and external deficits, rising inflation, and eroded reserve buffers” in the fiscal year 2023,” Washington-based IMF said in the statement.
FM Dar said that the IMF funds would shore up Pakistan’s foreign exchange reserves.
On Tuesday, Pakistan received USD 2 billion from Saudi Arabia, and a day later, another USD 1 billion from the UAE—which it cannot spend but merely retain in the treasury to keep its nose above water.
Dar said there had been a USD 4.2 billion increase in the SBP’s reserves during the week.
“So I am expecting that our forex reserves will close at USD 13-14 billion by tomorrow. The SBP will give the exact numbers.”
Pakistan went for a “smaller” SBA with the global lender instead of the ninth review of the loan program.
“This (program) has been limited to nine months so that whichever government comes into power after the elections can make its owns decisions,” the minister said.
Pakistan’s economy has been in a free fall mode for the last many years, bringing untold pressure on the poor masses in the form of unchecked inflation, making it almost impossible for a vast number of people to make ends meet.
Pakistan had been struggling to arrange enough foreign exchange to satisfy the IMF, which refused to provide the remaining USD 2.5 billion out of a USD 6.5 billion loan program, signed in 2019 and expired on June 30 this year.