ISLAMABAD: On Monday, the International Monetary Fund brought back Pakistan’s programme and its board approved a $1.16 billion loan. This ended months of uncertainty that had gotten worse in the last three days because of moves by the Pakistan Tehreek-e-Insaf.
The global lender also agreed to increase the loan size to about $7 billion and extend it until June 2023.
All of the executive directors supported Pakistan’s request for a loan approval and extension, except India, which didn’t vote. The board members asked questions about Pakistan’s decision to go back on the promises it made in February, but they also acknowledged the difficult steps Pakistan took to get the programme going again.
Pakistani officials say that the Board has approved the completion of the combined 7th and 8th review under the EFF and the release of the tranche of SDR 894 million, which is equivalent to $1.16 billion.
The Board has also approved extending the programme until the end of June 2023 and increasing access by SDR 720 million, or $930 million. With the expansion, the programme size has gone up to SDR4.988 billion, which is equal to 245.6% of Pakistan’s quota.
Sources say that the IMF Board sent condolences and sympathies to the Pakistani government over the tragic loss of lives and livelihoods caused by the floods in the country. The board liked that the Pakistani government worked to get the programme back on track and recommitted to the program’s policies and goals.
According to the agreement, Pakistan will have to show a primary budget surplus of Rs153 billion, or 0.2% of the GDP, until it is changed together with the IMF staff.
The sources said that the executive directors from the UAE, Saudi Arabia, and Qatar also promised to give Pakistan more money, as agreed to by the IMF staff and Islamabad.
The Pakistan Tehreek-e-Insaf (PTI) government that was in power before signed the 39-month EFF in July 2019. This was done to keep the country from going into default on its foreign repayment obligations. But the country stayed in turmoil, and even though it stayed in the IMF programme, its foreign exchange reserves stayed low because its external debt made it more vulnerable.
Due to problems with how the EFF programme was set up, goals that were too high, and a lack of political will to implement what former prime minister and PTI leader Imran Khan had agreed to, the programme was put on hold for almost two years out of three.