IMF board to review Pakistan’s $7b loan on September 25 after key conditions met

The International Monetary Fund (IMF) has confirmed that its Executive Board will meet on September 25 to discuss the approval of Pakistan’s $7 billion Extended Fund Facility (EFF). The loan is crucial for stabilising Pakistan’s economy, which has been grappling with rising inflation and dwindling reserves.

IMF spokesperson Julie Kozack announced the meeting during a press briefing on Thursday, saying, “We are very happy that we can say now that the board meeting is scheduled for September 25.”

This announcement comes after Pakistan secured the necessary financing assurances from development partners.

The $7 billion loan package had been under discussion since May, and a staff-level agreement was reached in July. Despite this, Pakistan faced delays in finalising the IMF Board’s approval. The government has had to meet stringent IMF conditions, including the imposition of a record Rs1.8 trillion in new taxes and electricity price hikes of up to 51%.

Among other conditions, Pakistan agreed to halt the establishment of any new special economic or export processing zones. The country also accepted that tax incentives for existing zones would not be extended after expiry. These measures are part of a broader set of industrial policy changes that, critics say, effectively transfer control of key economic decisions to the IMF.

State Bank of Pakistan (SBP) Governor Jameel Ahmad confirmed that the country arranged over $2 billion in external financing from lenders other than the IMF. "All those assurances and external financing have already been arranged by the government, and I don’t see any further hurdle now in taking our case to the board," Ahmad said during an analyst briefing on Thursday.

Prime Minister Shehbaz Sharif, addressing the federal cabinet earlier in the day, praised the progress in negotiations with the IMF. “We are moving in the right direction with the Fund, and I am hopeful for a positive outcome,” he said, while also acknowledging the harshness of the imposed measures.

The prime minister thanked Pakistan’s friendly countries for their support, stressing the need for Pakistan to free itself from dependence on external loans and build a self-reliant economy.

Kozack added that the successful implementation of the nine-month standby arrangement from 2023 had stabilised Pakistan’s economy. She pointed to consistent policymaking that had brought about a return to growth, disinflation, and an increase in the country's international reserves.

Despite meeting these tough conditions, Pakistan had struggled to secure a date for IMF board approval, causing concern over the country’s economic future. However, the upcoming September 25 meeting offers hope for much-needed relief, with IMF approval potentially unlocking additional financial support from other international partners.

Meanwhile, Finance Minister Muhammad Aurangzeb has announced that all matters with the International Monetary Fund have been successfully settled.

“Alhamdulillah, all negotiations with the IMF have been completed smoothly,” Aurangzeb said in a statement, expressing gratitude to Prime Minister Shehbaz Sharif’s team, the IMF’s negotiating team, and the relevant institutions for playing a pivotal role in the final stages of the deal.

The minister confirmed that the IMF board would formally approve the agreement later this month. “The economy is now moving from stability towards growth,” he said.

Aurangzeb highlighted the reduction in the policy rate, predicting that it would lead to increased investment and business activity in the country. “Economic activity will grow, creating more employment opportunities,” he added.