IMF Board to Approve $7 Billion Bailout For Pakistan Next Month

The federal government is working to get approval from the International Monetary Fund (IMF) Executive Board for the $7 billion bailout in September 2024.

The IMF has published its executive board’s agenda through August 28, 2024, and Pakistan’s bailout request is absent, indicating further delays. However, Finance Minister Muhammad Aurangzeb said that progress is being made. Addressing the Senate Standing Committee on Finance today, he expressed optimism that board approval could be secured in September.

He added that there is misinformation circulating regarding the program, but assured that settled matters with the IMF are being addressed.

The problem is the Finance Division is facing delays due to an unresolved external financing gap of $3-5 billion. Despite reaching a staff-level agreement last month, the country has yet to secure the necessary assurances from its development and bilateral partners. This is why the government has been unable to sign the Letter of Intent (LoI), a formal document required to request the IMF’s executive board’s approval for the bailout package

The finance minister and the State Bank of Pakistan governor are expected to sign this document on behalf of the government, but without confirmed external financing, the process remains stalled.

The financing gap is a significant obstacle in the way of securing the IMF’s support. The delay is particularly concerning as Pakistan faces a substantial external debt repayment obligation of $26.2 billion for the current fiscal year. While $12.3 billion of this debt is expected to be rolled over, efforts to extend this rollover from one year to three years have not been successful.

The IMF’s approval of the bailout is contingent upon timely confirmation of the necessary financing, only then would Pakistan get the money it so desperately wants.