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The International Monetary Fund’s board has granted approval for a $3 billion bailout program to support Pakistan’s ailing economy. This decision comes following a staff-level agreement reached between Pakistan and the IMF last month, ensuring crucial funding for the cash-starved nation.
The approved bailout program includes a 9-month Stand-By Arrangement (SBA) of SDR2,250 million (equivalent to around $3 billion or 111 percent of quota). The immediate disbursement of approximately $1.2 billion will provide essential assistance to stabilize the economy and support the government’s economic stabilization program.
Pakistan currently faces a challenging economic juncture. It is characterized by a difficult external environment, devastating floods, and policy missteps. Additionally, these factors have resulted in significant fiscal and external deficits, rising inflation, and depleted reserve buffers in the fiscal year 2023.
The nine-month SBA serves as a short-term lifeline for Pakistan’s economy, which has been on the verge of default. After eight months of tough negotiations focused on fiscal discipline, this financial assistance is crucial to address the country’s balance of payments crisis and improve its economic stability.
Pakistan and IMF Reach $3 Billion Stand-By Arrangement: A Lifeline for Economic Stability
The IMF board’s approval is expected to unlock additional bilateral and multilateral external financing for Pakistan, providing further support to alleviate the financial strain. Recent developments, including Beijing rolling over $5 billion of Pakistan’s loan, Saudi Arabia’s $2 billion deposit, and the UAE’s $1 billion deposit, have also contributed to averting a debt default.
The positive outcome of the IMF bailout program has instilled confidence among investors. As a result, Fitch credit rating agency upgraded Pakistan’s sovereign rating to CCC, showcasing the growing faith in the country’s financial stability. This significant development has provided much-needed relief and optimism for investors in the country’s stocks and bonds.
The approved bailout program reflects a collective effort to address Pakistan’s economic challenges, stabilize its financial situation, and pave the way for sustainable growth in the future.
