IMF executive board to vote on $3bn loan for Pakistan

July 12, 2023 (MLN): The International Monetary Fund’s executive board will hold a crucial vote on whether to approve a short-term $3 billion loan program for Pakistan later on Wednesday, according to a person familiar with the matter, Bloomberg reported.

The South Asian nation received initial approval for the nine-month arrangement last month, a move that eased fears of a sovereign default and led to a rally in the nation’s dollar bonds.

Since the preliminary agreement, the funding environment has looked more promising. 

Fitch Ratings Inc. upgraded Pakistan by one notch to CCC long-term foreign currency issuer rating this week.

Pakistan’s finance minister also confirmed that Saudi Arabia had deposited $2bn into the country’s central bank.

Prime Minister Shehbaz Sharif’s government referred requests for comment to the IMF.

The multilateral lender’s local mission did not respond. 

The Pakistan bailout was not included in the official agenda of the IMF executive board posted online, triggering speculation among analysts and investors there could be further requirements from the multilateral lender leading to more delays.

With general elections due to be held by October, the government has been scrambling to tackle the country’s economic crisis and has stepped up efforts to meet IMF demands, including raising taxes and energy prices and cutting spending.

The IMF loans are critical to help Pakistan manage some $23bn of external debt payments for the fiscal year just started, more than six times its foreign-exchange reserves. 

Pakistan is the last of three South Asian countries to clinch IMF funding due to delays in delivering reforms and getting creditors to agree amid a political crisis.

The nation’s key stock index is one of the best performers globally in July and dollar bonds have rallied about 27% in the past month.

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