IMF Deposits First Installment of $1.2 Billion as part of $3 Billion Bailout for Pakistan

Introduction

Pakistan’s finance minister announced on Thursday that the International Mary Fund (IMF) deposited the long-awaited first installment of $1.2 billion with the central bank as part of a recently signed $3 billion bailout, to allow the country to avoid default on its debt.

Minister Ishaq Dar said in televised statements that the remaining amount of $1.8 billion will be received by Islamabad from the IMF over the next nine months.

The money will support the country’s foreign exchange reserves, which have shrunk to less than $4 billion in recent months, prompting fears of a default, according to the Associated Press.

Boosting Foreign Exchange Reserves

Dar said the country’s foreign exchange reserves could rise to $14 billion this week.

This development came a day after the IMF announced its executive board had approved an agreement to launch a $3 billion loan to support the economic stabilization programme in Pakistan.

Wednesday’s announcement came less than two weeks after Pakistan and the IMF approved the plan after meetings with Prime Minister Shahbaz Sharif, Dar, and other officials.

“Pakistani’s economy was hit hard by significant shocks last year, especially the spillover effects of floods, the high volatility of commodity prices prime and tightening of external and internal financing conditions,” Kristalina Georgieva, head of the International Mary Fund, said on Wednesday.

He added that the $3 billion bailout has been diligently implemented by Pakistan and will give it an opportunity to restore stability to the economy and address the imbalances through consistent policy implementation.

Efforts to Overcome Economic Crisis

The bailout has been on hold since last December due to the country’s failure to comply with the 2019 deal signed between the fund and former prime minister Imran Khan.

A turning point in the talks came last month when Sharif met with the IMF chief in Paris to discuss reviving the $6 billion bailout plan, which was due to expire on June 30.

Since he came to power in April 2022 by ousting Khan in a vote of no confidence in Parliament, Sharif has tried to overcome the economic crisis.

Pakistan’s economy suffered a major shock last summer when floods killed 1,739 people and caused $30 billion in losses.