The IMF board has approved a $3 billion bailout for Pakistan. The crisis-hit nation will receive an upfront payment of approximately $1.2 billion, with the remaining amount to be disbursed over the course of the next nine months.
Facing imminent debt default, the South Asian nation had reached a critical point with only enough foreign currency reserves to cover one month’s worth of imports.
In addition, the country received financial assistance from its allies Saudi Arabia and the United Arab Emirates (UAE) this week.
Prime Minister Shehbaz Sharif of Pakistan expressed that the approved bailout is a significant stride towards stabilizing the country’s economy.
He remarked, “This bailout strengthens Pakistan’s economic standing, enabling us to tackle immediate and medium-term economic challenges. It also provides the incoming government with the necessary fiscal flexibility to navigate the path ahead.”
After eight months of arduous negotiations, the IMF agreement was reached to address the critical long-term issues plaguing Pakistan’s struggling economy.
The nation had reached a critical point where it was at risk of defaulting on its debt payments to creditors.
Last year, Pakistan faced the double blow of widespread floods, exacerbating the country’s existing challenges, such as high inflation and economic mismanagement under successive governments.
In response, Saudi Arabia provided support by depositing $2 billion into Pakistan’s central bank on Tuesday, as confirmed by Finance Minister Ishaq Dar.
Finance Minister Ishaq Dar confirmed on Wednesday that the central bank of Pakistan has successfully received an additional $1 billion in financial support from the United Arab Emirates (UAE).
The UAE, along with other energy-rich Middle Eastern nations, had pledged this amount in April. However, the funds were withheld until the finalization of the IMF bailout was assured.
The approved IMF deal, coupled with the financial assistance from Saudi Arabia and the UAE, will facilitate the release of additional funds to bolster Pakistan’s struggling economy.
Finance Minister Ishaq Dar has stated that Pakistan’s foreign exchange reserves are anticipated to reach approximately $15 billion by the end of this month.
Following the deal, credit rating agency Fitch upgraded Pakistan’s sovereign rating on Monday. This development has provided some relief to investors in the country’s stocks and bonds.
Since the end of June, when the IMF granted preliminary approval for the bailout, Pakistan’s bonds, despite its significant debt burden, have experienced a notable surge.
As Mr. Sharif’s coalition government prepares for the upcoming national election, it is still required to implement substantial spending cuts in order to fulfill the conditions set by the bailout agreement. Pakistan has been grappling with a skyrocketing cost of living, with the official annual inflation rate currently hovering around 30%.
In an effort to combat escalating prices, the country’s central bank raised its main interest rate to an unprecedented 22% last month.
This recent bailout package marks another instance of support provided to Pakistan by the IMF, adding to a history of over 20 loans received from the international lender since 1958.
Source : bbc.com
