Pakistan to request $6B in fresh funding from IMF program

Pakistan is seeking a new $6 billion loan from the International Monetary Fund to repay debts due this year

Pakistan is planning to request a fresh loan of at least $6 billion from the International Monetary Fund (IMF) to assist the incoming government in repaying substantial debts due this year, as per a report by Bloomberg News citing a Pakistani official. 

The nation aims to engage in discussions for an Extended Fund Facility with the IMF, with talks expected to commence in March or April, as outlined in the report. Pakistan managed to avoid default last year with the help of a short-term IMF bailout, but this program is set to expire next month. Hence, a new administration will need to negotiate a longer-term agreement to maintain stability in the $350 billion economy. 

Before receiving the bailout, Pakistan had to implement various measures mandated by the IMF, such as revising its budget, raising the benchmark interest rate, and hiking electricity and natural gas prices. The IMF spokesperson mentioned ongoing discussions with authorities regarding necessary long-term reform initiatives, expressing readiness to provide support through a new arrangement post-election, subject to a formal request from Pakistan. 

The caretaker finance minister of Pakistan has not yet responded to a Reuters inquiry regarding the Bloomberg report. Fitch, a ratings agency, highlighted the critical need for the next government to secure funding from international and bilateral partners due to Pakistan’s fragile external position. Fitch emphasized the significance of a new agreement for the country’s credit profile, assuming that a deal will be reached in the coming months. Failure to secure this agreement could escalate external liquidity challenges and heighten the risk of default. 

Source: Reuters