Cash-strapped Pakistan makes formal request to IMF for another bailout

Pakistan has made a formal request to IMF for seeking the next bailout package in the range of USD 6 to USD 8 billion with the possibility of augmentation through climate financing, a media report said on Saturday.

Cash-strapped Pakistan also requested to dispatch the International Monetary Fund (IMF) review mission next month to firm up details of the next bailout package for three years under the Extended Fund Facility (EFF).

However, the exact size and timeframe of the new package will only be determined after evolving consensus on the major contours of the next programme in May 2024, Geo News reported from Washington.

A high-level Pakistani delegation led by Finance Minister Muhammad Aurangzeb is currently visiting Washington to attend the annual spring meetings of the IMF/World Bank.

Although Pakistani authorities are pitching a rosy picture of the economy, the IMF in its latest Regional Economic Outlook (REO) released by Middle East and Central Asia (ME and CA) said the cash-strapped country's external buffers deteriorated, mostly reflecting ongoing debt service, including Eurobond repayments.

“Where inflationary pressures persist, monetary policy should remain tight and follow a data-dependent approach (Egypt, Kazakhstan, Pakistan, Tunisia, Uzbekistan), while closely monitoring risks of a reversal of inflation developments,” it added.

After contracting in 2023, growth in Pakistan is projected to rebound to 2 per cent in 2024, supported by continuing positive base effects in the agriculture and textile sectors.

Meanwhile, Finance Minister Aurangzeb told the World Bank in Washington that with the reform agenda fully implemented in key areas, Pakistan's economy has the potential to grow to USD 3 trillion by 2047.

Pakistan's current USD 3 billion arrangement with the IMF runs out in late April and the government is seeking a longer and bigger loan to help bring permanence to macroeconomic stability and an umbrella under which the country can execute much-needed structural reforms.

The IMF however emphasised that prioritising reforms to revitalise the Pakistani economy outweighs the size of the new loan package being negotiated.