- Analysts expect approval from the IMF executive board.
- Loan will be disbursed in 3-4 days after approval: Analyst
- Loan to help Pakistan open more multilateral funds.
The International Monetary Fund (IMF) is all set to hold a key executive board vote on Pakistan’s $3 billion bailout program today, a person familiar with the matter said. Bloomberg,
Islamabad signed a short-term IMF agreement on 30 June as a standby arrangement under which the country would receive $3 billion over nine months, subject to approval by the IMF’s board.
talking to geo.tvTahir Abbas, head of research at Arif Habib Limited (AHL), said, “I expect [IMF’s board] Will discuss and approve the loan.”
“Once the approval of the board is received, Pakistan will get $1.1 billion within three to four days,” Abbas said.
Pakistan’s external financing environment has improved since then as Fitch Ratings Inc upgraded the cash-strapped country a notch to the CCC long-term foreign currency issuer rating this week.
Saudi Arabia has also deposited $2 billion in a State Bank of Pakistan (SBP) account, Finance Minister Ishaq Dar confirmed on Tuesday, a major development to ease the country’s financial turmoil.
With skyrocketing inflation and barely enough foreign exchange reserves for a month of controlled imports, Pakistan’s economic woes could turn into debt default in the absence of an IMF bailout, analysts say.
The Fitch statement noted that the upgrade reflects the country’s improved external liquidity and funding conditions following the SLA with the IMF, but warned that the fiscal deficit remains wide.
With the IMF agreement, Pakistan can now unlock other external financing.
In the plan sent to the lender, sources in the finance division said Pakistan arranged bilateral funding of $3.5 billion from China, $2 billion from Saudi Arabia and $1 from the United Arab Emirates.
On the multilateral side, Pakistan aims to secure $500 million from the Asian Development Bank, $500 million from the World Bank and $3 billion from the IMF.
Fitch said local authorities expect $25 billion in gross new external financing in fiscal 2014, while $15 billion in public debt maturities, including $1 billion in bonds and $3.6 billion to multilateral creditors.
The South Asian nation has also witnessed severe political uncertainty since former Prime Minister Imran Khan was ousted through a no-confidence motion in April last year.
To ensure that the program’s measures are implemented before the October elections, the lender’s team met with all mainstream political parties to garner support and consensus for the SBA.
Khan’s Pakistan Tehreek-e-Insaf said it has given its support for the accord.