Stage set to bring Pakistan out of economic difficulty, says PM Shehbaz after IMF nod

Prime Minister Shehbaz Sharif on Thursday lauded efforts of the coalition-led government after the International Monetary Fund (IMF) and Pakistani authorities reached a staff level agreement, paving way for disbursement of the next tranche.

The prime minister said the agreement has set the stage to bring Pakistan out of the economic difficulties it is facing amid high inflation, falling foreign exchange reserves and risks of slower economic growth.

His statement came after the IMF and Pakistan authorities reached the much-delayed staff-level agreement. "Subject to Board approval, about $1,177 million (SDR 894 million) will become available, bringing total disbursements under the programme to about $4.2 billion,” said the IMF in its statement released early on Thursday.

IMF announces staff-level agreement with Pakistan

The development also came as a relief for Pakistan's policymakers as the incumbent government was actively pursuing the US-based lender to revive its stalled bailout programme.

Taking to Twitter, PM Shehbaz congratulated the ministries of finance and foreign affairs for their efforts in getting the IMF program revived.

“It was great teamwork,” said the prime minister. “The agreement with the Fund has set the stage to bring the country out of economic difficulties,” he added.

Finance Minister Miftah Ismail also hailed the development.

"We will soon receive $1.17b as the combined 7th & 8th tranche. I want to thank the PM, my fellow ministers, secretaries and especially the finance division for their help and efforts in obtaining this agreement," he said on Twitter.

Meanwhile, the IMF said that in order to support programme implementation and meet the higher financing needs in fiscal year 2022-23, as well as catalyse additional financing, its Board will consider an extension of the Extended Fund Facility (EFF) until end-June 2023 and an augmentation of access by SDR 720 million that will bring the total access under the EFF to about $7 billion.

Pakistan had sought an increase in the size and duration of its $6-billion programme in April.

Intra-day update: Pakistan's rupee registers gain against US dollar after IMF news

The revival of the IMF programme is widely considered as crucial for Pakistan's economy which has seen its foreign exchange reserves fall relentlessly with import cover currently standing at less than two months. During the week ended on 30-Jun-2022, SBP’s reserves decreased by $493 million to $9.82 billion due to external debt and other payments.

At the same time, a widening trade deficit, led by a high import bill, has dented the local currency.

Pakistan entered the current IMF programme in 2019, but only half the funds have been disbursed to date.