The International Monetary Fund (IMF) has announced a staff-level agreement to provide $2.3 billion to Pakistan through two separate loans, signaling confidence in the government’s ongoing economic reforms aimed at rebuilding the country’s fragile economy, as per Bloomberg.
According to a statement released by the Washington-based lender, Pakistan is set to receive approximately $1 billion as the second installment of a $7 billion loan package secured last year, pending approval from the IMF’s executive board. In addition, Pakistan has secured a new agreement under the Resilience and Sustainability Facility (RSF), granting access to around $1.3 billion over a 28-month program.
The news spurred positive market reactions in Pakistan. The nation’s benchmark KSE-100 Index surged 1.2%, its largest increase in nearly three weeks, after the market opened. Pakistani dollar bonds also experienced gains, with the note maturing in 2029 reaching its highest level in over a month.
The IMF financing has been crucial in helping Pakistan recover from a severe dollar shortage that brought the South Asian nation close to economic collapse in 2022. Since the initial loan approval last year, Pakistan’s foreign exchange reserves have increased, and inflation has cooled, allowing the country’s central bank to support economic growth through key rate cuts. These improvements prompted both Moody’s and Fitch to upgrade Pakistan’s credit ratings last year.
To comply with the loan agreement’s requirements, Prime Minister Shehbaz Sharif’s government has implemented several ambitious measures, including raising fuel taxes, approving legislation to tax agricultural income, and attempting to sell a stake in state-owned Pakistan International Airlines.
In discussions with the IMF, Pakistani authorities reaffirmed their commitment to the program and plan to augment their efforts by implementing reforms to address long-standing economic vulnerabilities, according to the IMF statement.
