The International Monetary Fund’s (IMF) Executive Board has given its approval for the final tranche of $1.1 billion for Pakistan under the $3 billion Stand-By Arrangement (SBA).
According to an official statement issued by the IMF, the Executive Board completed the second and final review of Pakistan’s economic reform program supported by the SBA. This decision enables an immediate disbursement of SDR 828 million (approximately $1.1 billion), bringing the total disbursements under the arrangement to SDR 2.250 billion (about $3 billion).
Antoinette Sayeh, Deputy Managing Director and Chair, emphasized Pakistan’s determined policy efforts under the 2023 Stand-By Arrangement, stating that they have brought progress in restoring economic stability. Moderate growth has returned, external pressures have eased, and inflation, while still elevated, has begun to decline. Sayeh stressed the importance of continuing sound macroeconomic policies and structural reforms beyond the current arrangement to create stronger, inclusive, and sustainable growth.
The State Bank of Pakistan’s tight monetary policy stance remains appropriate until inflation returns to more moderate levels, according to the IMF. Further improvements in the functioning of the foreign exchange market, along with a market-determined exchange rate, are essential to buffer external shocks and attract financing, thereby supporting competitiveness and growth. The IMF also emphasized the need for significant rebuilding of foreign exchange reserves under the SBA and stronger action to address undercapitalized financial institutions to ensure financial stability.
Pakistan is expected to receive the loan payment this week, marking the third and final tranche of the $3 billion Stand-By Arrangement with the IMF, secured last summer to avert a sovereign default, which expires this month.
The approval of the final tranche followed Prime Minister Shehbaz Sharif’s meeting with IMF Managing Director Kristalina Georgieva in Riyadh, where discussions were held regarding Pakistan’s entry into another IMF program.
Pakistan has formally requested the IMF for a new long-term Extended Fund Facility (EFF) after the expiry of the $3 billion SBA. The exact size and timeframe of the new program will be determined after consensus on its major contours in May 2024.
Finance Minister Aurangzeb has stated that Islamabad aims to secure a staff-level agreement on the new program by early July. The economy faces a chronic balance of payments crisis, with nearly $24 billion to repay in debt and interest over the next fiscal year—three times more than its central bank’s foreign currency reserves.
