IMF Board discusses Pakistan loan program

The IMF Executive Board will meet today in Washington DC to consider the release of a second loan tranche to Pakistan.

Pakistan’s economy has suffered over the last few years due to volatile commodity prices, mismanagement, and major climate events, resulting in deficits, mounting inflation, and limited currency reserves. After months of negotiations, the IMF and Pakistan agreed to a $3 billion bailout program in July 2023 to mitigate the crisis, of which $1.2 billion was immediately released. To access additional funds, Pakistan must meet economic conditions such as implementing the IMF-recommended FY24 budget, adopting disinflation-oriented monetary policy, restoring a market-determined exchange rate, and introducing over $1 billion in new taxes, among other reforms.

Anticipate IMF approval of a $700 million payment to Pakistan, acknowledging recent budgetary improvements and a surprising $850 million increase in currency reserves in December. This approval hints at the probable disbursement of the remaining $1.1 billion by the bailout program’s conclusion in April 2024, indicating a sustained positive relationship between the IMF and Pakistan. Preparations for a follow-on program are likely to begin in the coming months as high inflation persists and Pakistan’s 2024 economic forecasts are challenging.