February 22, 2024 (MLN): The government is gearing up to approach the International Monetary Fund (IMF) for a substantial loan of at least $6 billion in a bid to manage its mounting debt obligations, as Bloomberg reported.
The South Asian nation will seek to negotiate an Extended Fund Facility with the IMF, the official said, asking not to be identified as the discussions are private, it added while quoting a Pakistani Official as a source.
Talks with the Washington-based lender are expected to start in March or April, the source said to Bloomberg.
Pakistan is trying to avert an economic crisis after a contentious election that saw the nation’s two main political dynasties form a coalition to keep out of power the party of jailed former leader Imran Khan. Shehbaz Sharif, who’s been nominated as prime minister, said last week that negotiating a fresh IMF loan will be a priority for the new administration.
However, Pakistan’s finance ministry did not immediately respond to a request for comment.
Pakistan faces $25bn of external debt payments in the fiscal year starting July, about three times its foreign-exchange reserves.
The EFF loans are typically approved for three to four years to support policies to fix structural imbalances and are repaid after 4.5 to 12 years, it added.
Investors have been watching the post-election developments closely, concerned that political uncertainty would hinder the nation’s ability to secure more funding, thereby increasing the risk of a debt default.
Earlier this week, Fitch Ratings underlined that failure to procure the loan would “increase external liquidity stress and raise the probability of default."
Shahbaz Sharif, who was prime minister from 2022 until last year, had success previously in negotiating funding with the IMF.
He helped obtain a nine-month, $3bn loan under the fund’s Stand-By Arrangement in June. Pakistan has a final review under that loan program, which could unlock about $1.1bn in funding before the facility expires in April. The nation has to repay a $1bn dollar bond in April.
For a new loan program, the incoming administration would need to make a formal request to the IMF after it takes office. The amount of funding would depend on subsequent talks with the lender.
The IMF said in a statement that it’s “available if requested, to support the post-election government through a new arrangement to address Pakistan’s ongoing challenges.”
It also said the fund continues to talk with Pakistan about needed longer-term economic changes, including the best ways to bolster government revenues, improve the energy sector, liberalize the country’s exchange rate, overhaul state-owned enterprises and strengthen its resilience to climate shocks, it further added.
To note, Pakistan has received 23 bailout packages from the IMF since gaining its independence in 1947, among the most of any country in the world.
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Posted on: 2024-02-22T23:22:51+05:00
