The International Monetary Fund said Wednesday it had reached a preliminary agreement with Pakistan’s newly elected government for the last payment under a $3 billion bailout package.
The global lender made the announcement at the conclusion of nearly weeklong discussions with officials in Islamabad aimed at reviewing the 9-month stand-by arrangement (SBA), which was secured last year to avert a sovereign debt default.
“The IMF team has reached a staff-level agreement with the Pakistani authorities on the second and final review of Pakistan’s stabilization program,” said Nathan Porter, the head of the IMF delegation.
“This agreement is subject to approval by the IMF’s executive board, upon which the remaining access under the SBA, $1.1 billion, will become available,” he added.
Pakistan has already received about $1.9 billion from the program, which will expire in April.
Porter acknowledged that Pakistan’s economic and financial position improved in the months following the establishment of the SBA program.
However, economic growth “is expected to be modest this year,” and inflation “remains well above the target,” the statement said.
Pakistani Prime Minister Shehbaz Sharif chaired a cabinet meeting Wednesday, during which participants were informed about signing the staff-level agreement with the IMF. Sharif’s office said after the meeting that the deal would help "improve the country’s economy and increase investors’ confidence.”
The IMF confirmed that Islamabad had also expressed interest in a successor medium-term funding program “with the aim of permanently resolving” the cash-strapped South Asian nation’s “deep-seated economic vulnerabilities."
Pakistan Finance Minister Muhammad Aurangzeb said in the lead-up to the discussions with the IMF delegation that his government would use the opportunity to make a case for “a longer and larger” loan program under the lender’s Extended Fund Facility.
Media reports suggested that Islamabad was seeking an IMF loan of at least $6 billion, but Aurangzeb did not disclose the size of the additional loan.
The Extended Fund Facility provides financial assistance to countries facing serious medium-term balance of payments problems because of structural weaknesses that require time to address.
Analysts say that Pakistan's debt-ridden economy is facing severe challenges despite having secured more than 20 IMF loan programs over the years. The economy is struggling due to the absence of critical reforms, dwindling foreign exchange reserves, a balance of payment crisis, soaring inflation, record depreciation of the Pakistani currency, and persistent political instability.
