Pakistan and IMF reach staff-level deal
to unlock $1.3bn in climate financing
The Pakistani government has reached
an agreement with the International Monetary Fund (IMF) for a new $1.3 billion
climate resilience loan and has also agreed on the first review of the ongoing
37-month bailout program, the IMF announced on Tuesday.
Subject to board approval, Pakistan
will be able to access the $1.3 billion under a new climate resilience loan
program, which spans 28 months. This deal will also unlock $1 billion under the
existing $7 billion bailout program, bringing total disbursements to $2
billion.
Pakistan had previously requested $1
billion from the IMF’s Resilience and Sustainability Trust (RSF) in October.
The RSF funding is available to countries that commit to high-quality reforms
aimed at building resilience against climate-related disasters. The loan is
repayable over 30 years, including a 10-year grace period, and typically offers
more favorable terms than an Extended Fund Facility (EFF), such as the $7
billion loan program Pakistan is currently under.
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adjusts Pakistan's foreign loan requirement to $25 billion
Secured in mid-2024, the IMF-backed
bailout program has been vital in stabilizing Pakistan's economy, with the
government indicating the country is on track for long-term recovery.
“Over the past 18 months, Pakistan
has made significant progress in restoring macroeconomic stability and
rebuilding confidence despite a challenging global environment,” said the IMF
in a statement.
Upon approval by the IMF board,
Pakistan will gain access to approximately $1 billion under the EFF, bringing
total disbursements under the program to $2 billion.
Inflation is expected to remain
stable in March, hovering around 1-1.5%, according to the finance ministry's
monthly economic outlook, after falling to its lowest level in nearly a decade
the previous month. Inflation has been steadily decreasing, dropping to 1.5% in
February from around 40% in May 2023.
The government has stated that
Pakistan's $350 billion economy has stabilized under the $7 billion IMF
bailout, which has helped the country avoid a default crisis.
“While economic growth remains
moderate, inflation has declined to its lowest level since 2015, financial
conditions have improved, sovereign spreads have narrowed significantly, and
external balances are stronger,” the IMF noted in its assessment of Pakistan.
Read More IMF
Board greenlights Pakistan's initial review, clearing the way for $700 million
disbursement
The government had been awaiting the
IMF’s approval of the first review of the bailout and the disbursement of $1
billion ahead of the annual budget, typically presented in June.
However, the IMF also highlighted
potential risks to Pakistan’s macroeconomic stability, including geopolitical
shocks to commodity prices, tightening global financial conditions, and rising
protectionism. These risks could undermine Pakistan's hard-won economic
stability.
Source: Dawn