The International Monetary Fund has agreed to assist with 1.1 billion dollars to Pakistan on Monday as a part of a $3 billion Stand-By Arrangement (SBA) with the IMF which was signed in July 2023. The assistance came within a few hours of discussion with the Prime Minister of Pakistan and the World Economic Forum and Kristalina Georgieva, the managing director of the IMF in Riyadh.
The aid is the second and last tranche of the agreement which has been signed after 8 years. As the agreement comes to an end, reports suggest that Islamabad is looking to enter into a new, longer-term Extended Fund Facility (EFF) deal with the fund.
According to Reuters, the discussion for another bailout has already begun but it has yet to make a formal request. If the country manages to secure the bailout, it would be the 24th IMF bailout.
The first tranche under SBA
Last July, Pakistan entered into a nine-month $3 billion SBA, which played a crucial role in stabilizing the economy and curbing the current account deficit. However, despite these gains, the budget deficit has persisted beyond control and is anticipated to reach around 7.4% of the GDP according to IMF estimates.
As per the Tribune report, the SBA’s implementation also imposed a substantial burden on the populace, manifesting in elevated taxes for the salaried class and steep rises in fuel, gas, and electricity prices.
Additionally, the autonomy of the State Bank of Pakistan (SBP) was compromised in favour of the IMF, hindering its ability to adjust interest rates, despite notable reductions in current and projected inflation rates.
Another EFF deal
Islamabad plans to initiate a longer-term Extended Fund Facility (EFF) agreement. Finance Minister Muhammad Aurangzeb anticipates securing a staff-level agreement by early July. Reports suggest that Pakistan seeks a loan spanning at least three years to enhance macroeconomic stability and implement overdue structural reforms. However, Aurangzeb has not disclosed the specific loan amount being pursued.