Pakistan-IMF likely to reach loan agreement for $6.5 billion

The Pakistan government is likely to reach a staff-level agreement with the International Monetary Fund (IMF) for a loan programme of $6.5 billion.

The new programme — the country’s 24th — would aim to stave off another economic crisis, strengthen the economy, and shore up its foreign exchange reserves.

Sources told Nukta that the government was earlier trying to get the international lender to loan $7-8 billion. However, the IMF would approve a loan amount of $6.5 billion instead.

The talks are expected to be concluded within two to three weeks followed by an agreement announcement next month.

Once the agreement is announced, it is likely that Pakistan will also be able to receive more funding — around $1-1.5 billion combined — from the Asian Development Bank, World Bank, and Asian Infrastructure Investment Bank.

Earlier this year, Pakistan completed the final review of a nine-month IMF programme of $3 billion that required the government to continue reforms, including expanding the tax base, improving the financial health of state-run enterprises, and providing protection to the social sector.

The programme’s first review had been completed in November after a long delay, with Pakistan’s economy on the brink of default and foreign exchange reserves at $3.679 billion, not even enough for one month of imports.

The economic crisis also made a heavy dent in the Pakistani rupee’s value, with the local currency reaching a low of Rs 307 and Rs335 in the interbank and open markets, respectively. Meanwhile, another illegal market — the gray market — also emerged, where the rupee traded at Rs350 against the dollar.

However, the forex situation improved after the government launched a wide-ranging crackdown on foreign exchange hoarders, exchange companies, and hundi-hawala dealers. As a result, the rupee’s value rose by 2.7% in the outgoing fiscal year compared to FY23 and FY22 when it depreciated by 50-60%.

The rupee is currently trading at Rs278.50 per dollar in the interbank market and Rs281 in the open market.