ISLAMABAD – On Wednesday, the International Monetary Fund (IMF) approved a crucial $7 billion bailout package for Pakistan, with the first tranche of funds scheduled for release on September 30.
The agreement marks a 37-month loan arrangement with the IMF, following the confirmation of $12 billion in bilateral loans from Saudi Arabia, China, and the UAE. Currently, Pakistan owes $5 billion to Saudi Arabia, $4 billion to China, and $3 billion to the UAE.
In addition, Pakistan secured $2 billion in external financing through Saudi oil facilities, a $400 million facility from the International Islamic Trade Finance Corporation (ITFC), and support from Standard Chartered Bank and other Middle Eastern banks.
As a nation of over 242 million people, Pakistan has long relied on IMF programs, frequently facing sovereign default and seeking help from the UAE and Saudi Arabia to meet its financial targets.
The specific terms of the bailout package will be disclosed soon, with experts anticipating positive economic outcomes. Islamabad has expressed hope that this program could be its last engagement with the IMF, contingent upon the successful implementation of essential structural reforms.
This bailout follows a staff-level agreement reached in July for an extended fund facility (EFF) of approximately $7 billion. The economy of this fifth most populous country is currently contending with multiple challenges, including high inflation and the aftermath of the 2022 floods. With dwindling foreign currency reserves, Pakistan has found itself in a debt crisis and sought IMF assistance, obtaining its first emergency loan last summer.
The new bailout package requires the government to commit to reforms, particularly aimed at broadening the tax base. If the government adheres to its commitments, the funds will be disbursed over the next three years.
The IMF has stated that the new program aims to enhance macroeconomic stability and promote inclusive growth, with key reforms focusing on strengthening fiscal and monetary policies, improving the management of state-owned enterprises, and expanding social protection through welfare programs.
