The International Monetary Fund (IMF) board has approved the seventh and eighth reviews of Pakistan’s bailout programme, Finance Minister Miftah Ismail said, which will release $1.17bn in funds to the cash-strapped country.
Ismail also said the IMF agreed to extend the programme by a year and augment the funds by $1bn.
Keep readinglist of 4 items
The money will be a lifeline to the South Asian country, currently suffering from devastating floods, whose foreign exchange reserves have fallen to levels that cover only a month of exports and whose economy has wrangled with an enormous current account deficit and high inflation.
“The IMF Board has approved the revival of our EFF program. We should now be getting the 7th & 8th tranche of $1.17 billion,” Ismail said on Twitter.
Alhamdolillah the IMF Board has approved the revival of our EFF program. We should now be getting the 7th & 8th tranche of $1.17 billion. I want to thank the Prime Minister @CMShehbaz for taking so many tough decisions and saving Pakistan from default. I congratulate the nation.
— Miftah Ismail (@MiftahIsmail) August 29, 2022
The IMF’s resident representative in Islamabad did not immediately respond to a request for comment.
The aid comes as “Pakistan’s economy has been buffeted by adverse external conditions due to spillovers from the war in Ukraine, and domestic challenges”, said IMF Deputy Managing Director Antoinette Sayeh in a statement.
“Steadfast implementation of corrective policies and reforms remain essential to regain macroeconomic stability, address imbalances and lay the foundation for inclusive and sustainable growth,” she said.
Pakistan’s 36-month, $6bn Extended Fund Facility programme, which it entered in 2019, has been stalled since earlier this year as it struggled to meet targets set by the lender.
The board was scheduled to take up Pakistan’s reviews in a meeting on Monday.
The new agreement follows months of deeply unpopular belt-tightening by the government of Shehbaz Sharif, who took power in April and has effectively eliminated fuel subsidies and introduced new measures to broaden the tax base.
Ismail said government efforts to get the programme back on track via painful corrective economic measures had saved Pakistan from default.
The go-ahead from the IMF board will open other multilateral and bilateral avenues of funding for Pakistan, which were awaiting a clean bill of health from the lender.
Pakistan is desperate for international support for its economy, which suffers from poor revenue collection and dwindling foreign reserves to pay its crippling debt.
The new government has slashed a raft of subsidies to meet the demands of global financial institutions but risks the wrath of an electorate already struggling under the weight of double-digit inflation.
A new coalition government – which came to power after former Prime Minister Imran Khan was removed by a parliamentary no-confidence vote – has said it will make the tough decisions needed to turn the economy around.
Successive administrations blame their predecessors for the country’s economic woes but analysts say the malaise stems from decades of poor management and a failure to tackle endemic corruption and widespread tax avoidance.
Under the deal agreed with the IMF last month, policy priorities included steadfast implementation of the budget to reduce the need to borrow.
Pakistan also agreed to continue power sector reforms, introduce a proactive monetary policy to tackle inflation, strengthen governance, combat corruption and improve the social security net.
But the IMF warned authorities should stand ready to take any additional measures necessary.