The International Monetary Fund (IMF) executive board has approved a 9-month Stand-By Agreement (SBA) for Pakistan, amounting to $3 billion. This decision includes an immediate disbursement of $1.2 billion to support Pakistan’s economic stabilization efforts. The remaining funds will be distributed in phases over the duration of the program, subject to two quarterly reviews.
This development follows the signing of a long-standing Staff Level Agreement (SLA) between the IMF and Pakistan on June 29, 2023. The program is designed to address immediate economic stabilization needs and protect against shocks, while also creating space for social and development spending to benefit the people of Pakistan.
Pakistan’s economic reform program comes at a critical time. The country has faced a challenging external environment, devastating floods, and policy missteps, leading to large fiscal and external deficits, rising inflation, and eroded reserve buffers in FY23. The new IMF-supported program aims to provide a policy anchor to address these domestic and external imbalances, and establish a framework for financial support from multilateral and bilateral partners.
Expert Commentary
Mohammad Sohail, CEO of Topline Securities Limited, highlighted the significance of the IMF loan, stating, “A better-than-expected loan by the IMF will provide much-needed stability to Pakistan at a time when the country will see a transfer of power from one government to caretakers and then to a new government.” He added that the loan will facilitate obtaining bilateral and multilateral loans, thereby supporting foreign exchange reserves and stabilizing currency and inflationary pressures.
In addition to the IMF agreement, Pakistan has received substantial financial support in the past two days, with the State Bank of Pakistan (SBP) receiving a $2 billion deposit from Saudi Arabia and a $1 billion deposit from the United Arab Emirates (UAE). As of June 30, 2023, the country’s total reserves stood at $9.75 billion.
