IMF postpones approval of second review of $6 billion bailout package for Pakistan

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Published: April 7, 2020 12:40:40 PM

The International Monetary Fund Executive board approved a three-year, USD 6 billion loan package for Pakistan in July last year to rein in mounting debts and stave off a looming balance of payments crisis, in exchange for tough austerity measures.

IMF, pakistan bialout package, Imran Khan, COVID-19 crisis, latest news on coronavirus pandemicPakistan had sought USD 1.4 billion worth of emergency facility from the IMF to offset the impact of COVID-19 on its external sector. (Reuters photo)

The IMF has postponed the approval of the second review of its USD 6 billion bailout package for the cash-strapped Pakistan scheduled on Friday, citing delay in implementing the agreed actions by Islamabad, a media report said on Tuesday.

The International Monetary Fund Executive board approved a three-year, USD 6 billion loan package for Pakistan in July last year to rein in mounting debts and stave off a looming balance of payments crisis, in exchange for tough austerity measures.

Pakistan approached the IMF in August 2018 for a bailout package after Prime Minister Imran Khan’s government took over. Despite loans from China, Saudi Arabia and the UAE, Prime Minister Khan’s government was forced to turn to the IMF due to mounting economic problems.

The IMF has confirmed the postponing of the approval of the second review of the bailout package but says its priority has now shifted to the approval of a rapid financing facility of USD 1.4 billion. The Ministry of Finance told The Express Tribune that the IMF did not inform it about any delay in approval of the second review of the 10-month-old loan programme.

In February, Pakistan and the IMF agreed that the fund’s executive board would approve the second review for release of a third loan tranche of USD 450 million on April 10, subject to fulfilling of all the conditions by the Pakistan government.

Sources said the IMF board would not take up Pakistan’s request for approval of the second review for the October-December 2019 period under the Extended Fund Facility (EFF) on April 10. “The priority now is to move ahead with the Rapid Financing Instrument (RFI). The IMF team and Pakistani authorities are working hard for prompt approval and disbursement,” said IMF Resident Representative Teresa Daban Sanchez.

The initial tentative agreed date, as given in IMF documents, for approval of the second review was March 6, which the IMF extended to April 10. The IMF has not given fresh date for approval of the second review. But USD 1.4 billion in additional facilities for COVID-19 related relief may be approved this month.

Pakistan had sought USD 1.4 billion worth of emergency facility from the IMF to offset the impact of COVID-19 on its external sector. Sanchez said regarding the EFF, as IMF Managing Director Kristalina Georgieva stated in her announcement of Pakistan’s RFI request, the Pakistani authorities remained committed to the policies and reforms outlined under the EFF-supported programme.

“The priority now is to get the RFI in motion and there will be a board meeting soon that will discuss, assess and provide guidance on next steps,” said Sanchez. But a delay in approving the second review may create more problems for the government due to its implications for markets and Pakistan’s financial relations with other multilateral lenders.

The latest deal is the 22nd bailout package since Pakistan became member of the IMF in 1950. Earlier, China gave USD 4.6 billion in shape of deposits and commercial loans and Saudi Arabia provided USD 3 billion cash deposit and USD 3.2 billion oil facility on deferred payments. The United Arab Emirates also provided USD 2 billion cash deposit to Pakistan.

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