IMF Approves $1.1 Billion Loan to Pakistan as Final Installment of $3 Billion Stand-by Arrangement

The International Monetary Fund (IMF) has approved a $1.1 billion loan to Pakistan, marking the final installment of a $3 billion Stand-by Arrangement. The decision came following a meeting between Pakistani Prime Minister Shehbaz Sharif and IMF Managing Director Kristalina Georgieva in Riyadh.

The $3 billion loan program, approved by the IMF Executive Board on July 12, 2023, has already provided $1.9 billion to Pakistan, helping the country avoid default. The IMF acknowledged the improvement in Pakistan's economy, with growth expected to reach 2% in FY24, a primary fiscal surplus of 1.8% of GDP in the first half of FY24, and a decline in inflation.

The Stand-by Arrangement successfully provided a policy anchor to address Pakistan's domestic and external imbalances, as well as a framework for financial support from multilateral and bilateral partners. The program focused on fiscal adjustment, protection of social spending, addressing external shocks, disinflation, and structural reforms in the energy sector, state-owned enterprises, and climate resilience.

Why this matters: The approval of the final loan tranche is a significant development for Pakistan's economy, which has been struggling with persistent balance of payments crises and high debt burdens. The successful completion of the IMF program is expected to boost investor confidence and help Pakistan secure additional external support.

Despite the progress made under the Stand-by Arrangement, the IMF stressed the necessity for Pakistan to continue its sound macroeconomic policies and structural reforms to achieve stronger, inclusive, and sustainable growth. The significance of continued external support was also highlighted.

Pakistan is now seeking a new long-term Extended Fund Facility program with the IMF to address its fiscal and external sustainability issues and achieve strong, sustainable, and inclusive growth. Prime Minister Shehbaz Sharif reiterated his government's commitment to putting Pakistan's economy back on track through structural reforms, fiscal discipline, and prudent policies during his meeting with the IMF Managing Director.

The $1.1 billion loan approval comes as a relief for Pakistan's $350 billion economy, which faces a chronic balance of payments crisis, with nearly $24 billion to repay in debt and interest over the next fiscal year. The release of the final installment marks the completion of the Stand-by Arrangement and paves the way for Pakistan to pursue another IMF program to continue economic stabilization and <a href="https://www.imf.org/en/News/Articles/2024/04/29/pr24130-pakistan-imf-executive-

Key Takeaways

• IMF approves $1.1B loan, final installment of $3B Stand-by Arrangement for Pakistan.
• Loan program helped Pakistan avoid default, improved economy with 2% growth expected.
• Stand-by Arrangement addressed Pakistan's imbalances, secured external support.
• Successful completion boosts investor confidence, paves way for new IMF program.
• Pakistan seeks new Extended Fund Facility to address fiscal, external sustainability.