Pakistan expecting approval for $7 bn IMF loan by September, says finance minister

Pakistan’s Finance Minister Muhammad Aurangzeb announced on Wednesday that the federal government is making significant progress in its discussions with the International Monetary Fund (IMF) and anticipates securing board approval in September for a new $7 billion loan programme.

The 37-month loan agreement between Pakistan and the IMF was reached in July, with the IMF stating that the programme’s implementation would be contingent on approval from its executive board, as well as securing “timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners.”

“We are making good progress with the IMF for Board approval in September,” Reuters reported Aurangzeb as saying via a text message.

Pakistan is currently negotiating with Saudi Arabia, the United Arab Emirates, and China to meet the gross financing requirements stipulated under the IMF programme. Following a visit to China in July, Aurangzeb had mentioned ongoing talks aimed at reprofiling energy sector debt.

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In the past, Pakistan has relied on rollovers or disbursements from long-time allies, in addition to IMF financing, to meet its external financing obligations.

According to the IMF’s website, as of June 30, Pakistan had outstanding Purchases and Loans amounting to 6,369.17 million in Special Drawing Rights (SDR). The SDR is an international reserve asset. It is not a currency, but its value is based on a basket of five currencies—the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.

During an analyst briefing following the State Bank of Pakistan’s decision in July to reduce interest rates by 100 basis points, the central bank chief indicated that rollovers of $16.3 billion are expected by the fiscal year ending in June 2025, which would cover more than half of the country’s $26.2 billion external financing requirement.

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In its July 2024 World Economic Outlook, the IMF projected Pakistan’s real GDP to grow by 2 per cent in 2024.

With inputs from Reuters