Islamabad remains in a challenging position as it struggles to confirm an external financing gap ranging from $3 to $5 billion. This difficulty persists even though five weeks have passed since a staff-level agreement was reached for a new bailout package under the Extended Fund Facility (EFF).
The delay in securing this confirmation has impeded Pakistan’s ability to sign a Letter of Intent (LoI). This document is crucial for formally requesting the IMF’s executive board to approve a $7 billion package under the EFF programme, which spans 37 months. The finance minister and the governor of the State Bank of Pakistan are expected to sign the LoI, which would then be submitted to the IMF board for approval.
The financing gap has emerged as a significant obstacle in obtaining the fresh bailout package from the IMF. According to the IMF’s schedule, Pakistan is not listed among the countries for which the board will review loan approvals until August 28, 2024.
Update on Pakistan’s IMF Loan Request and Financial Status
I reached out to Federal Minister for Finance and Revenues Mohammad Aurangzeb regarding the status of the LoI and the IMF board’s consideration of the $7 billion request. He indicated that progress is being made and expressed optimism about obtaining board approval in September.
The staff-level agreement between Pakistan and the IMF was finalized on July 12, 2024. At that time, it was anticipated that the IMF board would review the request within four to six weeks. The agreement, however, is contingent on the approval of the IMF’s executive board and the timely confirmation of financing assurances from Pakistan’s development and bilateral partners. During the current fiscal year 2024-25, a hefty repayment of $26.2 billion in external debt is faced by Pakistan.
This amount includes a $12.3 billion rollover of deposits. Although a three-year rollover was sought by the government, only a one-year rollover has been secured, with commitments from countries like Saudi Arabia, China, and the UAE.
