Pakistan receives $700m tranche from IMF as UAE rolls over $2b loan

Pakistan on Thursday received $700 million from the International Monetary Fund (IMF) as part of its bailout programme, the State Bank of Pakistan (SBP) confirmed in a statement.

According to SBP, it received Special Drawing Rights (SDR) 528 million —equivalent to $705.6 million in value —from the IMF following the successful completion of the first review by the global lender’s executive board under the Stand-By Arrangement (SBA).

It said that the disbursement will be reflected in SBP reserves for the week ending on January 19, 2024.

Meanwhile, the UAE has also confirmed the rollover of its two deposits of US$1.0 billion each placed with SBP for another year which were maturing in January 2024.

Read more: Pakistan to receive $700m from IMF

The handing over of around $700 million brings the total disbursements under the SBA with the IMF to $1.9 billion.

On Thursday, the IMF’s executive board had approved the first review of the bailout package for Pakistan. The board meeting was held nearly two months after Pakistan and the IMF reached a staff-level agreement.

Pakistan and the IMF had signed the nine-month programme in July 2023 for a $3 billion lending as a bridge financing ahead of an expected long-term deal.

In recent weeks, the IMF, World Bank, Asian Development Bank (ADB), and Asian Infrastructure Investment Bank (AIIB) have helped Pakistan sustain its foreign reserves at their current levels.

The IMF has further cut Pakistan’s economic growth projection to 2% from July’s estimate of 2.5%.

Similarly, the IMF has cut the inflation rate forecast from 26% to nearly 24%, providing space for lowering the interest rates.

The IMF emphasised on continued fiscal consolidation to reduce public debt, while protecting development needs.

Pakistan remains “determined to achieve a primary surplus of at least 0.4% of GDP in FY24, underpinned by federal and provincial government spending restraint and improved revenue performance support, if necessary, by contingent measures,” a statement by the IMF read.

The country would also be required to “complete the return to a market-determined exchange rate”, it added.

“Pakistan would also pursue state-owned enterprise and governance reforms to attract investment and support job creation, while continuing to strengthen social assistance,” the statement continued.

The IMF has revised Pakistan’s foreign loan requirements to $25 billion for this fiscal year.

The Washington-based lender also lowered its inflation projection to 24% for this fiscal year -- cutting it from 25.9%.

The IMF remained successful in acquiring a date for the next general elections in Pakistan and in return ignored a few critical areas that in the past had become a cause for the failure of the last $6.5 billion bailout package.

It also brought the activities of the Special Investment Facilitation Council (SIFC) under its purview.

As against the old forecast of $32.9 billion, the IMF has now projected the foreign remittances at $29.4 billion -- a reduction of $3.5 billion, said finance ministry sources.

According to the IMF projections, the current expenditures in this fiscal year may remain around Rs14.6 trillion -- higher by Rs1.24 trillion.

However, the development spending is projected at Rs782 billion -- Rs168 billion less than the allocation approved by the National Assembly in June.

As a result, the size of the budget, for the first time, would cross Rs15.4 trillion in the history of the country.

The global lender has kept the overall primary balance figure unchanged at 0.4% of the GDP or Rs401 billion -- which would require massive revenue efforts and a squeeze on subsidies.

Pakistan has committed to the IMF to further increase the petroleum levy collection to a record Rs918 billion in this fiscal year.