Pakistan receives first tranche of $1.03 billion from IMF under EFF

The State Bank of Pakistan (SBP) has received the first tranche of Special Drawing Rights (SDR) 760 million, equivalent to $1.03 billion, from the International Monetary Fund (IMF) under the 37-month Extended Fund Facility.

This disbursement follows the IMF Executive Board’s approval of a $7 billion programme aimed at stabilising Pakistan’s economy. The SBP confirmed that these inflows will be reflected in its liquid reserves, with an official update expected on Thursday, October 3, 2024.

The IMF package is seen as crucial in addressing Pakistan’s economic challenges, including balance of payments pressures and dwindling foreign reserves.

The international lender on Wednesday approved a $7 billion new bailout package after Pakistan promised to overhaul its agriculture income tax, transfer some fiscal responsibilities to the provinces and agreed to limit subsidies.

The Prime Minister's Office said that the Executive Board of the IMF had approved the 37-month Extended Fund Facility totaling $7 billion. It also authorised immediate release of the first loan tranche of less than $1.1 billion. It is the 25th IMF programme that Pakistan has obtained since 1958 and 6th EFF.

Pakistan will pay around 5% interest rate on the IMF loan, according to the Ministry of Finance statement given to the Senate Standing Committee on Economic Affairs.

The IMF board has approved the programme without addressing one of the root causes of taking the loans - the need for restructuring of the external and domestic debt that consumed 81% of Pakistan's tax revenues in the last fiscal year.

Prime Minister Shehbaz Sharif on Wednesday again vowed that this will be Pakistan's last IMF programme – a similar statement that he had also given after the approval of the 24th IMF programme in 2023.

Sharif gave credit for the new IMF bailout package to Deputy Prime Minister Ishaq Dar, Chief of the Army Staff General Asim Munir and the finance team. He particularly thanked the Punjab Chief Minister Maryam Nawaz, Sindh's Murad Ali Shah and Balochistan Chief Minister Sarfraz Bugti by name but did not name K-P Chief Minister Ali Amin Gandapur.

Without the cooperation of all the four provinces, including K-P, the federal government cannot complete the 25th programme of the nation's history. The PM's statement suggests that he is giving preference to politics over national unity, which is needed for completing the IMF programme.