IMF greenlights final $1.1 billion tranche for Pakistan's bailout package

The International Monetary Fund (IMF) has approved $1.1 billion in funding for Pakistan, marking the second and final tranche of a $3 billion standby arrangement. This funding was secured by Islamabad last summer to prevent a sovereign default.

IMF approval

The decision by the IMF's executive board comes as Pakistan seeks additional financial support from the fund. Prime Minister Shehbaz Sharif recently discussed a new loan program with IMF Managing Director Kristalina Georgieva during the World Economic Forum in Riyadh.
Islamabad is aiming for a new, larger long-term Extended Fund Facility (EFF) agreement with the IMF, as the current standby arrangement is set to expire this month. Pakistan's Finance Minister, Muhammad Aurangzeb, has indicated that a staff-level agreement on the new program could be reached by early July. The country seeks this loan over at least three years to stabilize its macroeconomy and implement necessary structural reforms.
While discussions between Pakistan and the IMF are ongoing, Aurangzeb has refrained from disclosing the exact loan amount being sought. Formal requests have not yet been made, but negotiations between the Fund and the government are already underway.

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Financial challenges

Pakistan's economy, valued at $350 billion, is grappling with a severe balance of payments crisis. The country faces a daunting task of repaying nearly $24 billion in debt and interest over the next fiscal year. This amount is three times more than its central bank's foreign currency reserves, highlighting the urgent need for financial assistance.
If secured, this would mark Pakistan's 24th IMF bailout. The country has a history of turning to the IMF for financial support during times of economic turmoil.

In summary, the IMF's approval of additional funding for Pakistan comes at a critical juncture as the country navigates its financial challenges. Islamabad's pursuit of a new, long-term loan agreement underscores the importance of stabilizing the economy and implementing structural reforms to address underlying issues.

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