IMF Board Approves $700 Million Bailout to Pakistan

The International Monetary Fund's board of directors has approved a $700 million loan for Pakistan as part of a $3 billion bailout, according to the finance ministry. The completion of the IMF's first review of the programme allows for an immediate disbursement of $700 million in special drawing rights, bringing the total disbursements under the Standby Arrangement (SBA) to $1.9 billion, the ministry announced on social media platform X.

After the IMF loan programme, approved in July, helped avert a sovereign debt default, the South Asian country is now run by a caretaker government. Prior to the bailout, Pakistan was required to implement a slew of IMF-mandated measures, including a budget revision, an increase in its benchmark interest rate, and increases in electricity and natural gas prices.

An IMF mission led by Pakistan mission chief Nathan Porter concluded its visit in November. It reviewed whether Pakistan was on track to meet benchmarks set under the SBA agreed in July and signed a staff level agreement. Under the bailout deal, the IMF also got Pakistan to raise $1.34 billion in new taxation to meet fiscal adjustments. The measures fuelled all-time high inflation of 38 per cent year-on-year in May, the highest in Asia, which is still hovering above 30 per cent.

"IMF funding along with recent inflows from multilateral lenders will further help the Pakistani rupee, that is fairly stable (over the) last few months," said Mohammad Sohail, CEO of Topline Securities.

He added that this new tranche would help Pakistan in getting rollovers from friendly countries like the United Arab Emirates, China and Saudi Arabia and ease external debt repayment pressure.