The International Monetary Fund (IMF) is preparing to send a delegation to Pakistan next week for discussions regarding the release of the second tranche of a $3 billion loan, amounting to $710 million, to support the financially distressed nation in stabilizing its debt-laden economy. This move comes after the Washington-based global lender had previously disbursed $1.2 billion to Pakistan in July as part of the nine-month, $3 billion bailout program aimed at aiding the government's efforts to restore stability to the country's struggling economy. Although essentially a bridge loan, this funding brought much-needed relief to Pakistan, which had been grappling with a severe balance of payments crisis and dwindling foreign exchange reserves.
The initial review talks for the second loan tranche, totaling $710 million, are scheduled to commence on November 2 and are crucial in paving the way for approval by the International Monetary Fund (IMF) board in December, according to The Express Tribune newspaper.
Esther Perez, the resident representative of the IMF, noted, "The IMF team led by Nathan Porter will field a mission to Pakistan starting on November 2 on the first review under the current Stand-By Arrangement (SBA) of USD 3 billion."
Pakistan's economy has been in a state of decline for several years, exerting significant pressure on the impoverished population, largely due to unbridled inflation.
While the federal government and the State Bank of Pakistan remain optimistic about successfully completing the review, the external financing gap poses a significant challenge, as indicated by the Ministry of Finance's internal assessment, which reveals a substantial disparity between the planned loans and the actual disbursements for the current fiscal year.
In the lead-up to the IMF talks, Pakistan, in its endeavor to seek fiscal assistance in the form of loans, has approached several nations. Specifically, the country has asked Saudi Arabia to provide a $1 billion oil facility on a deferred payment basis, effective from January 2024. The negotiations for this facility are still in progress, with modalities, costs, and other terms and conditions to be worked out over the coming months. This facility is an integral component of the financing plan developed by Pakistani authorities in coordination with the IMF as part of the $3 billion Standby SBA. The current facility is set to expire in December of this year.
