Islamabad July 14 2023: Pakistan is set to draw in $5.6 billion in additional financing after securing a loan from the International Monetary Fund, a move seen as helping the South Asian nation avoid a default and boosting its foreign-exchange reserves.
The new funding includes $3.7 billion of commitments from bilateral partners including Saudi Arabia and the United Arab Emirates, Nathan Porter, the IMF’s mission chief for Pakistan, said in an emailed response to Bloomberg News. Some $3 billion has been disbursed, he said.
The IMF executive board approved the bailout loan program of $3 billion this week after months of delay, boosting Pakistan’s financial stability ahead of elections this year. Fitch Ratings upgraded Pakistan this week on the improving funding environment.
Prime Minister Shehbaz Sharif sealed the bailout program after holding hour-long phone calls and several meetings with IMF Managing Director Kristalina Georgieva. Pakistan’s funding gap had been one of the outstanding issues for months before a previous program lapsed in June.
The IMF loan program also reflects $400 million more than what would have been available under the previous program, Porter said.
The nation has seen inflows of about $4.2 billion this week alone that will almost double its reserves. More inflows are expected from multilateral development partners including the World Bank, Asian Infrastructure Investment Bank and Islamic Development Bank in the coming weeks and months, Bilal Kayani, Prime Minister’s coordinator on the economy said in a Twitter post.
Improving finances will ease Pakistan into elections later this year and Sharif has said he will hand over power to a caretaker government next month.
“This better-than-expected loan by the IMF will provide much needed stability to Pakistan at a time when Pakistan will see a transfer of power from one government to caretaker and then to a new government,” said Mohammad Sohail, chief executive officer at Topline Securities Ltd.
Pakistan’s assets have rallied with bonds gaining 40% in the past month, while stocks surged about 9% to become one of the top performers globally.