IMF approved the immediate release of the tranche following a key meeting of the global lender’s executive board in Washington late Monday night.All board members favoured releasing the funds, except India, which abstained.
Pakistan has been reeling from a severe economic crisis for more than two years, with its inflation at one point shooting up to nearly 38% and its foreign currency reserves depleted to $3bn in Feb 2023, enough to cover less than five weeks of imports.
Last year, the global lender had approved a nine-month standby arrangement with Pakistan “to support its economic stabilisation programme”. The approval had allowed for an immediate disbursement of $1.2bn, with the rest phased over the programme’s duration — subject to two quarterly reviews.
The IMF bailout proved important to save the country from default, the state broadcaster quoted PM Sharif as saying.
Leading economist Qaiser Bengali expressed scepticism about the perceived stability, highlighting the temporary nature of the current situation and underscoring the necessity of meaningful reforms to address long-term economic challenges.
“If the so-called stability was due to a rise in exports or better inflow of dollars, that would have been meaningful, but that is not happening,” Bengali said, adding that the economy cannot run on a policy of getting new loans to pay past loans.
Pakistan’s external debt obligations exceed $130 billion, with concerns raised by financial experts regarding the potential inflationary impact of the country’s debt-driven approach to fiscal deficit management.
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