From One Bailout To The Next: Cash-Strapped Pakistan Seeks Another Multi-Billion Loan From IMF

Cash-strapped Pakistan has officially approached the International Monetary Fund (IMF) for another bailout package ranging between $6 billion and $8 billion, with the possibility of augmentation through climate financing.

The request also includes an invitation for an IMF review mission to visit in the upcoming month to finalise the specifics of a proposed three-year deal under the Extended Fund Facility (EFF).

Details on the size and timeline of the bailout package will be determined after discussions in May 2024, aiming to establish a consensus on the main elements of the programme, Geo News reported.

A high-level Pakistani delegation, led by Pakistan's Finance Minister Muhammad Aurangzeb, is currently visiting Washington to attend the annual spring meetings of the IMF and World Bank.

Although Pakistani authorities are pitching a rosy picture of the economy, the IMF's recent Regional Economic Outlook for the Middle East and Central Asia has highlighted significant economic challenges, including a decline in Pakistan’s external financial buffers, primarily due to ongoing debt repayments.

The report also advised countries with persistent inflationary pressures, including Pakistan, to maintain stringent monetary policies dependent on economic data, while keeping a close watch on inflation trends.

The IMF projects that Pakistan's economy will recover to a growth rate of 2 per cent in 2024, due to positive developments in agriculture and textiles.

Concurrently, at discussions with the World Bank, Minister Aurangzeb expressed confidence in the long-term potential of Pakistan's economy, suggesting it could grow to $3 trillion by 2047 if key reforms are successfully implemented.

Pakistan's current $3 billion agreement with the IMF is due to expire in late April, with the government seeking a larger and longer-term financial package to help stabilise the economy and support necessary structural reforms.

The IMF however emphasised that prioritising reforms to revitalise the Pakistani economy outweighs the size of the new loan package being negotiated.

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