After Islamabad secured an extension on loan tenure from friendly nations, Finance Minister Muhammad Aurangzeb announced that the International Monetary Fund (IMF) is expected to finalize the $7 billion loan program for Pakistan.
Pakistan requested its three largest bilateral partners—Saudi Arabia, China, and the United Arab Emirates—to rollover deposits of $12 billion for three to five years. These nations have agreed to a three-year rollover, with an annual renewal, to support Islamabad in obtaining IMF approval.
The IMF has been informed of this critical development. The loan program will extend over 37 months under the Extended Fund Facility (EFF). The IMF executive board meeting is anticipated to occur at the end of August or early September.
“There are assurances that the IMF’s Executive Board might approve the $7 billion EFF package by the end of August 2024 or a few days later in early September,” Aurangzeb told journalists following a Senate Standing Committee on Finance meeting.
Last month, Pakistan and the IMF reached a staff-level agreement for a $7 billion, 37-month loan deal, which includes stringent measures such as increasing taxes on farm income. This agreement concluded negotiations that began in May after Islamabad completed a short-term, $3 billion program, which helped stabilize the economy, prevent a sovereign debt default, and set challenging revenue targets necessary for IMF approval.
However, the IMF board’s approval hinges on the $12 billion debt profiling by friendly countries, including $5 billion from Saudi Arabia, $4 billion from China, and $3 billion from the UAE for a three to five-year period.
“Pakistan has also requested debt relief from China for power plants,” Aurangzeb said.
Speaking to The News, the minister mentioned that the IMF has assessed an external financing gap of $3 billion to $5 billion.
During a Senate panel meeting, the minister disclosed that the government has appointed a consultant to launch a Panda bond, aiming to complete the transaction within the current year. The government is also considering appointing a Chinese consultant to manage debt owed by Chinese companies and banks, with hopes for positive developments in establishing a joint working group soon.
“Pakistan seeks an extension of the repayment tenure for Chinese IPPs for three to five years, amounting to $9 billion,” Aurangzeb added.
He noted that international commercial banks are interested in Pakistan but are awaiting favorable pricing, IMF bailout approval, and improved credit ratings.
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