Islamabad: The IMF transferred $1.2 billion to Pakistan, finance Minister Ishaq Dar said on Thursday, shortly after global lenders approved a $3 billion bailout program for the cash-strapped country.
The International Monetary Fund (IMF) signed a stand-by agreement in late June to provide short-term loans to Pakistan for nine months, and its executive board on Wednesday formally approved a $3 billion bailout program to support the government. Efforts to stabilize the country’s battered economy.
It said the board had approved a $2.25 billion Special Drawing Rights (SDR) – reserve funds bailout package for the country – funds the institution would credit to its member countries’ accounts amounting to about $3 billion.
Finance Minister Dar announced on Thursday that the global lender has transferred $1.2 billion to the State Bank of Pakistan.
While finalizing the Standby Arrangement (SBA), $1.2 billion has been decided to be paid upfront and the $1.8 billion “balance amount” will be transferred after two reviews in November and February, Dar said while addressing the media.
“I would like to share the information that the advance payment of $1.2 billion has been transferred by the IMF to the account of the State Bank of Pakistan (SBP),” he said.
The Finance Minister said that the IMF’s Executive Board has approved the SBA with Pakistan, a nine-month program, and Islamabad will receive $3 billion.
He said the funds would boost Pakistan’s foreign exchange reserves, which he said would include $1 billion transferred by the United Arab Emirates a day earlier.
Foreign reserves increased by $4.2 billion in the week after Saudi Arabia and the UAE contributed $2 billion and $1 billion, respectively, Dar said. “So I expect our forex reserves to end at $13-14 billion by tomorrow. The State Bank will provide the exact figures,” he said.
The IMF deal effectively eliminated the threat of default.
The development comes two weeks after the two sides reached a staff-level agreement on the stand-by arrangement.
The global lender said on Wednesday that the program would focus on “implementing the FY24 budget to facilitate Pakistan’s necessary fiscal adjustment and ensure debt sustainability”.
“The adjustment comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods and policy missteps have led to large fiscal and external deficits, rising inflation and erosion of reserve buffers in fiscal 2023,” the Washington-based IMF said in a statement.
Dar said Pakistan had gone for a “small” SBA with the global lender instead of the ninth review of the loan program.
“It (the program) is limited to nine months so that whichever government comes to power after the elections can take its own decisions,” the minister said.
Pakistan’s economy has been in a free fall mode for the past several years, bringing untold pressure on the poor population in the form of uncontrolled inflation, making it almost impossible for a large number of people to make ends meet.
Pakistan has been struggling to arrange enough foreign exchange to satisfy the IMF, which has refused to pay $2.5 billion of a $6.5 billion loan program signed in 2019 and expired on June 30 this year.
The International Monetary Fund (IMF) signed a stand-by agreement in late June to provide short-term loans to Pakistan for nine months, and its executive board on Wednesday formally approved a $3 billion bailout program to support the government. Efforts to stabilize the country’s battered economy.
It said the board had approved a $2.25 billion Special Drawing Rights (SDR) – reserve funds bailout package for the country – funds the institution would credit to its member countries’ accounts amounting to about $3 billion.
Finance Minister Dar announced on Thursday that the global lender has transferred $1.2 billion to the State Bank of Pakistan.
While finalizing the Standby Arrangement (SBA), $1.2 billion has been decided to be paid upfront and the $1.8 billion “balance amount” will be transferred after two reviews in November and February, Dar said while addressing the media.
“I would like to share the information that the advance payment of $1.2 billion has been transferred by the IMF to the account of the State Bank of Pakistan (SBP),” he said.
The Finance Minister said that the IMF’s Executive Board has approved the SBA with Pakistan, a nine-month program, and Islamabad will receive $3 billion.
He said the funds would boost Pakistan’s foreign exchange reserves, which he said would include $1 billion transferred by the United Arab Emirates a day earlier.
Foreign reserves increased by $4.2 billion in the week after Saudi Arabia and the UAE contributed $2 billion and $1 billion, respectively, Dar said. “So I expect our forex reserves to end at $13-14 billion by tomorrow. The State Bank will provide the exact figures,” he said.
The IMF deal effectively eliminated the threat of default.
The development comes two weeks after the two sides reached a staff-level agreement on the stand-by arrangement.
The global lender said on Wednesday that the program would focus on “implementing the FY24 budget to facilitate Pakistan’s necessary fiscal adjustment and ensure debt sustainability”.
“The adjustment comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods and policy missteps have led to large fiscal and external deficits, rising inflation and erosion of reserve buffers in fiscal 2023,” the Washington-based IMF said in a statement.
Dar said Pakistan had gone for a “small” SBA with the global lender instead of the ninth review of the loan program.
“It (the program) is limited to nine months so that whichever government comes to power after the elections can take its own decisions,” the minister said.
Pakistan’s economy has been in a free fall mode for the past several years, bringing untold pressure on the poor population in the form of uncontrolled inflation, making it almost impossible for a large number of people to make ends meet.
Pakistan has been struggling to arrange enough foreign exchange to satisfy the IMF, which has refused to pay $2.5 billion of a $6.5 billion loan program signed in 2019 and expired on June 30 this year.