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IMF and Pakistan Commence Official Dialogue for New Loan Program

IMF and Pakistan Commence Official Dialogue for New Loan Program

A delegation from the International Monetary Fund (IMF), headed by Mission Chief Nathan Porter, has arrived at the Finance Division today to initiate discussions on a new loan program.

According to sources, these discussions are expected to last for approximately two weeks. Alongside the new loan program, both parties will also delve into deliberations regarding the budget for the upcoming financial year. Additionally, the IMF delegation will gather pertinent data from various departments while continuing negotiations with the Finance Division regarding the federal budget for fiscal year 2025.

Also Read: IMF Board Greenlights Release of $1.1 Billion Loan for Pakistan

Pakistan has formally requested a new bailout package, seeking up to $8 billion for a minimum duration of three years under the Extended Fund Facility, with the potential for additional climate financing. Finance Minister Muhammad Aurangzeb previously stated that he anticipates reaching a Staff-Level Agreement on an expanded loan program with the IMF by June-July 2024.

In its latest “Second and final review under the Stand-By Arrangement (SBA),” the IMF has revised down its projection of Pakistan’s gross external financing needs to $21.044 billion for fiscal year 2024-25, amounting to 5.5 percent of GDP. This is compared to $24.965 billion, or 7.1 percent of GDP, for the outgoing fiscal year.

The IMF also highlighted exceptionally high risks, including delayed adoption of reforms, high public debt and gross financing needs, low gross reserves, the State Bank of Pakistan’s net FX derivative position, a decrease in inflows, and sociopolitical factors, which could impede policy implementation and undermine repayment capacity and debt sustainability.