UPDATE - Pakistan, IMF reach agreement on 1st bailout review

By Aamir Latif and Alperen Aktas

KARACHI, Pakistan (AA) – The International Monetary Fund (IMF) announced a preliminary agreement with Pakistan on Wednesday on the initial review of a $3 billion bailout.

Following approval from the IMF’s Executive Board, Pakistan is set to receive $700 million.

Earlier Wednesday, IMF mission chief Nathan Porter said the agreement is subject to approval by the IMF’s Executive Board.

"Upon approval, around $700 million (SDR 528 million) will become available, bringing total disbursements under the program to almost $1.9 billion," he said.

"(Pakistan's) inflation is expected to decline over the coming months amid receding supply constraints and modest demand. However, Pakistan remains susceptible to significant external risks, including the intensification of geopolitical tensions, resurgent commodity prices, and the further tightening in global financial conditions. Efforts to build resilience need to continue," Porter stressed.

"In this regard, strengthening macroeconomic sustainability and laying the conditions for balanced growth are key priorities under the SBA (standby arrangement). The confirmation came following a guarantee from the United Arab Emirates to assist cash-strapped Pakistan in bridging its financial gap," he added.

A Finance Ministry official in Islamabad, wishing not to be named, told Anadolu that Pakistan is set to receive the second tranche worth $710 million "very soon" following the UAE's much-needed guarantee.

Pakistan and the IMF signed a $3 billion standby arrangement in July this year to help shore up the South Asian country's depleting foreign reserves and contain a mounting balance of payment crisis.

The $3 billion funding is higher than the remaining $2.5 billion from a $6.5 billion bailout package agreed in 2019 which expired in June.

Pakistan has already received the first tranche of $1.2 billion from the IMF in July.

IMF Managing Director Kristalina Georgieva gave credit to Pakistani authorities, particularly the interim finance minister, for “a very difficult time sticking to the program that they have.”

Citing "tax collection" as the predominant issue in the release of the second tranche, she said Pakistan currently collects 12% tax-to-GDP, which should be at least 15% to help the revenues sustain the functioning of the country's economy.