Pak gets IMF cash injection $1.2 billion released as part of $3 billion deal

ISLAMABAD: The International Monetary Fund (IMF) has handed out Pakistan $1.2 billion to help the cash-starved nation avoid debt defaults, finance minister Ishaq Dar said Thursday.

The funds were transferred to the account of the State Bank of Pakistan (SBP), the country’s central bank, Dar told a news conference here.

The announcement came a day after the global financial institution cleared a $3-billion loan deal for Pakistan under a nine-month programme, which came after eight months of tough negotiations over fiscal discipline.

After the IMF executive board approved the “standby” loan agreement, it was decided that $1.2 billion would be given upfront and the “balance” of $1.8 billion after reviews in November and February next year, the minister said. “This (programme) has been limited to nine months so that whichever government comes to power after elections, can make its own decisions.”

Dar expressed hope that the immediate release of $1.2 billion would shore up Pakistan’s foreign exchange reserves, which shrank to less than $4 billion in recent months, fuelling fears about debt repayment defaults.

In the days before the IMF agreement was approved, Dar pointed out that Pakistan had received $3 billion in deposits from Saudi Arabia ($2 billion) and the United Arab Emirates ($1 billion).

Dar claimed a $4.2 billion jump in the SBP’s forex reserves this week and a surge to “$13-14 billion by tomorrow (Friday)”. The state bank will give the exact numbers,” he said.

The IMF bailout had been on hold since December because of Pakistan’s lack of compliance with a 2019 agreement signed with the previous Imran Khan-led government. A breakthrough in talks came last month when current PM Shehbaz Sharif held talks with IMF chief Kristalina Georgieva in Paris.

On Wednesday, Georgieva noted that “Pakistan’s economy was hit hard by significant shocks last year, notably spillovers from severe impacts of floods, large volatility in commodity prices, and tightening of external and domestic financing conditions”. She said the $3-billion bailout, if “implemented faithfully” by Pakistan, will give it an opportunity to regain macroeconomic stability”.