IMF approves $7 billion loan package for Pakistan

The Executive Board of the International Monetary Fund (IMF) has approved a $7 billion loan package for Pakistan. This new bailout program, spanning 37 months, marks Pakistan's 24th IMF assistance package. With this approval, Pakistan will also be eligible to receive funds from other international organizations and countries.

Pakistan is set to receive the first installment of $1 billion or $1.1 billion by September 30, with the second installment expected within the same financial year. The approval follows a staff-level agreement reached between Pakistan and the IMF on July 12.

The loan aims to strengthen fiscal and monetary policy, broaden the tax base, improve the management of state-owned enterprises, enhance competition, secure a level playing field for investment, and scale up social protection through increased generosity and coverage in a major welfare program.

The IMF emphasized that the program seeks to build on the macroeconomic stability achieved over the past year by further strengthening public finances, reducing inflation, rebuilding external buffers, and removing economic distortions to spur private sector-led growth.

Pakistan currently owes $5 billion to Saudi Arabia in cash deposits and holds $4 billion in deposits from China and $3 billion from the UAE. Securing external financing of $2 billion from bilateral and commercial lenders was a prerequisite for the IMF board’s approval. The global lender later identified an external financing gap of $2 to $2.5 billion, which was confirmed through a Saudi oil facility, an ITFC facility of $400 million from IsDB, and additional funds from Standard Chartered Bank and other Middle East-based commercial banks.