Pakistan receives first tranche of $1.026bn IMF loan: SBP

KARACHI: Pakistan has received over $1 billion from the International Monetary Fund as the first tranche of a $7 billion bailout, the central bank said on Friday.

These crucial funds will help the country stabilise its economy.

The IMF’s executive board on Wednesday approved the $7 billion, 37-month Extended Fund Facility, which will provide support to sustain the country’s recovery from a crisis. The medium-term external stability of Pakistan is contingent upon the lending facility of the IMF.

“SBP has received the first tranche of SDR 760 million (equivalent to $1026.9 million) from the IMF today. These inflows will be reflected in SBP liquid reserves to be released on Thursday Oct 3, 2024,” the SBP said in a brief statement.

The SBP’s foreign exch­ange reserves stood at $9.53 billion as of September 20.

Analysts anticipate that as the nation enters the new IMF programme, the foreign exchange reserves will increase, the external account will continue to be fully funded, and there will be less chance of fiscal slippage.

The IMF’s disbursement to Pakistan will immediately boost the country’s forex reserves helping stabilise the rupee and ease concerns over external debt repayments, said Saad Hanif, the head of research at Ismail Iqbal Securities.

This will also enhance investor confidence, which could lead to improved capital inflows and positive momentum in the stock market, according to Hanif.

“In the medium term, the IMF programme will require Pakistan to maintain fiscal and monetary discipline, which could result in macroeconomic stability, including lower inflation and a better fiscal balance. However, the accompanying austerity measures may slow growth and increase living costs in the short term,” he added.

Islamabad was working to put into effect requirements from the IMF that Prime Minister Shehbaz Sharif had previously described as “strict” to complete the new loan programme that was agreed to in July and is anticipated to be the nation’s last.

In order to address structural difficulties and enhance macroeconomic stability, the new program will necessitate sound policies and reforms, as well as “continued strong financial support from Pakistan’s development and bilateral partners, the IMF states.

The reports, which quote the IMF, claim that China, Saudi Arabia, and the United Arab Emirates have given Pakistan “significant financing assurances” related to a new IMF program that goes beyond an agreement to roll over $12 billion in bilateral loans that Islamabad owes them.

In the analysts’ briefing held after the monetary policy meeting this month, the governor of the SBP stated that the foreign exchange reserves of the central bank are expected to reach $12 billion by March 2025 and $13 billion by June 2025.

As of March 2025, the total external debt repayments amount to $14.1 billion. Out of this, $8.3 billion will be rolled over or refinanced, and $5.8 billion will be paid off, according to the SBP.

As of September 12, the SBP has repaid $4 billion, including $2.3 billion in rollovers and a net payment of $1.7 billion.

Earlier, International Monetary Fund (IMF) Managing Director Kristalina Georgieva has said that the new bailout package approved for Pakistan is aimed at assisting the government in economic recovery and reduction in inflation along with employment creation and inclusive growth.

“Very productive meeting with Pakistan PM @CMShehbaz! We discussed Pakistan’s new Fund-supported program helping ongoing recovery, disinflation, increased tax fairness, and reforms to create new jobs and inclusive growth,” said the top IMF official in a post on X while referring to her meeting with Prime Minister Shehbaz Sharif.

Her statement comes after the Executive Board of the Washington-based lender approved a $7 billion Extended Fund Facility (EFF) with the first tranche of $1.1 billion likely to be released by September 30, 2024.