Pakistan has decided to approach the International Monetary Fund (MF) to increase the size of its existing $7 billion bailout package, with the Middle East conflict and its economic fallout emerging as the key reason behind the move.
The deliberations have taken place at the Prime Minister’s Office and the Ministry of Finance, where officials are considering augmenting the ongoing Extended Fund Facility (EFF) that runs until September next year.
The move comes shortly after Saudi Arabia committed an additional $3 billion deposit, while also extending its existing $5 billion deposit, taking Saudi cash support with Pakistan’s central bank to $8 billion in total.
The immediate pressure stems from a $3.5 billion gap in foreign exchange reserves after the United Arab Emirates did not roll over part of its support, creating a sudden financing need.
According to officials, Pakistan may seek an additional $2-2.5 billion from the IMF under the existing program to help absorb the impact of the regional conflict on energy imports, logistics, inflation, exports, and remittances.
Finance Minister Muhammad Aurangzeb has already raised the issue during meetings in Washington, D.C. with senior IMF officials, including discussions around program continuity and external shock impact. Pakistan has so far drawn $4 billion under the current IMF package, and with its quota limits, there remains room to seek further support.
The government is also said to be exploring whether the IMF can front-load the additional financing instead of releasing it in staggered tranches, which could help provide faster relief to reserves and market confidence.
The IMF mission is expected to visit Pakistan next month for budget discussions, which could also include talks on taxation and the potential expansion of the program.