IMF expected to release $700 million bailout tranche for Pakistan in January board meeting

Pakistan, grappling with financial challenges, is anticipated to receive a much-needed boost as the International Monetary Fund's (IMF) Executive Board is set to convene on January 11, potentially approving the disbursement of the next tranche amounting to $700 million under the existing $3 billion Stand-By Arrangement (SBA), the Dawn newspaper reported.

The upcoming meeting, as per the IMF Executive Board calendar, holds significant importance for Pakistan's economic landscape, with discussions centered on the financial support crucial for stabilising the country's economic trajectory.

The current IMF program, initiated at $3 billion, is expected to conclude in the second week of April, with approximately $1.8 billion remaining undisbursed. The initial tranche of $1.2 billion was disbursed in July, providing vital support to Pakistan's financial outlook.

In November 2023, a staff-level agreement was reached between the IMF staff and Pakistani authorities for the first review under Pakistan's SBA. While expectations for board approval were initially set for December, the process has been rescheduled for January 11.

The disbursement of the next tranche holds significance for Pakistan's economic stability, with the outcome shaping the ongoing economic cooperation between the country and the IMF.

Discussions between the IMF staff and Pakistani authorities on policies to strengthen macroeconomic stability continue, with progress made over the FY23 budget, according to the IMF. The financial support is crucial for addressing economic headwinds, with projections indicating a potential contraction of 0.5 per cent in real GDP for 2024 and a notable increase in the Consumer Price Index, signaling higher inflation.

Despite a surprise increase of $853 million in the reserves of the State Bank by the end of December 2023, Pakistan is eager to secure the second tranche, indicative of its commitment to fulfilling the IMF's demands for economic recovery.

The Ministry of Finance recently announced the successful surpassing of the July-December revenue collection target of Rs 4.425 trillion by Rs 43 billion, aligning with the IMF's objectives.

Upon receiving the second tranche of $700 million in January, Pakistan is expected to receive the remaining amount in March under the $3 billion SBA. However, Caretaker Finance Minister Shamshad Akhtar has hinted at the need for a new agreement with the IMF to revive the economy, emphasising the challenging economic conditions.

Pakistan's historical reliance on IMF support is underscored by its engagement in 24 arrangements with the IMF since becoming a member in 1950, addressing economic challenges through the decades. The current program initiated in 2019 has seen disbursements of about $4 billion to Pakistan, with a remaining balance of $2.6 billion.

(With PTI inputs.)