IMF gives its approval for a $3 billion bailout program for Pakistan in a big respite to the nation’s crumbling economy

In a significant relief for Pakistan’s struggling economy, the International Monetary Fund (IMF) has granted approval for a $3 billion bailout program on Wednesday. The IMF executive board announced that an immediate disbursement of approximately $1.2 billion will be provided for immediate relief, with the remaining installments to follow later, as reported by Dawn.

The approved amount of $3 billion is higher than the expected funding for Pakistan. This bailout comes at a time when the nation was eagerly awaiting the disbursement of the remaining $2.5 billion from a previous bailout package of $6.5 billion that was initially agreed upon in 2019 but expired in June.

This development follows the Standby Arrangement reached between Pakistan and the IMF on June 29 to address the country’s financial crisis. The IMF stated, “The Executive Board of the International Monetary Fund approved a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of SDR2,250 million (about $3 billion, or 111% of quota) to support the authorities’ economic stabilization program.”

The IMF acknowledged that Pakistan is facing a challenging economic situation, attributing it to a combination of adverse conditions such as a difficult external environment, devastating floods, and policy missteps. These factors have led to large fiscal and external deficits, rising inflation, and depleted reserve buffers in FY23.

It is noteworthy that the IMF approval comes after Saudi Arabia and the United Arab Emirates (UAE) made substantial deposits of $2 billion and $1 billion, respectively, into the State Bank of Pakistan. These contributions have helped boost Pakistan’s foreign exchange reserves.

Pakistan’s Prime Minister, Shehbaz Sharif, described the endorsement of the $3 billion agreement as a “major step forward” in the government’s efforts to stabilize the economy. He emphasized that it strengthens Pakistan’s economic position to overcome immediate and medium-term challenges, providing the next government with the fiscal space to pave the way forward. Sharif commended Finance Minister Ishaq Dar and his team at the Ministry of Finance for their hard work in achieving this milestone.