BACK

Pakistan to seek at least $6bn in new IMF loan programme

Agencies
Friday, Feb 23, 2024

PAKISTAN plans to seek a new loan of at least $6 billion from the International Monetary Fund to help the incoming government repay billions of dollars in debt due this year, according to a Pakistani official.

The South Asian nation will seek to negotiate an Extended Fund Facility with the IMF, the official said, asking not to be identified as the discussions are private. Talks with the Washington-based lender are expected to start in March or April, the person said.

Pakistan is trying to avert an economic crisis after a contentious election that saw the nation’s two main political dynasties form a coalition to keep out of power the party of jailed former leader Imran Khan. Shehbaz Sharif, who’s been nominated as prime minister, said last week that negotiating a fresh IMF loan will be a priority for the new administration.

Pakistan’s finance ministry didn’t immediately respond to a request for comment.

Pakistan faces $25 billion of external debt payments in the fiscal year starting July, about three times its foreign-exchange reserves. The EFF loans are typically approved for three to four years to support policies to fix structural imbalances and are repaid after 4.5 to 12 years.

Investors have been watching the post-election developments closely, concerned that political uncertainty would hinder the nation’s ability to secure more funding, thereby increasing the risk of a debt default. Fitch Ratings Ltd. said this week that failure to procure the loan would “increase external liquidity stress and raise the probability of default.”

Sharif, who was prime minister from 2022 until last year, had success previously in negotiating funding with the IMF. He helped obtain a nine-month, $3 billion loan under the fund’s Stand-By Arrangement in June. Pakistan has a final review under that loan program, which could unlock about $1.1 billion in funding before the facility expires in April. The nation has to repay a $1 billion dollar bond in April.

For a new loan program, the incoming administration would need to make a formal request to the IMF after it takes office. The amount of funding would depend on subsequent talks with the lender.

The IMF said in a statement that it’s “available, if requested, to support the post-election government through a new arrangement to address Pakistan’s ongoing challenges.”

It also said the fund continues to talk with Pakistan about needed longer-term economic changes, including the best ways to bolster government revenues, improve the energy sector, liberalize the country’s exchange rate, overhaul state-owned enterprises and strengthen its resilience to climate shocks.

Pakistan has received 23 bailout packages from the IMF since gaining its independence in 1947, among the most of any country in the world.