ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have reached an agreement after 10 days of “tough” parleys, unlocking over a $1 billion loan tranche under Extended Fund Facility (EFF) that had been suspended for the last five months.
The sources, familiar with the development, said that a meeting took place between Prime Minister Shehbaz Sharif and the IMF delegation, where the mission informed the premier about the agreement.
The prime minister, who interacted with the Fund officials in Islamabad via video link from Lahore, approved the agreement, the sources added.
The development comes hours after Finance Minister Ishaq Dar had announced that talks with the IMF were “on track” and the government would share “good news” on the matter today.
The IMF’s loan is critical for the country’s $350 billion economy as the State Bank of Pakistan (SBP)-held foreign exchange reserves have fallen to $2.91 billion — enough to provide an import cover of 0.58 months.
Originally signed by former prime minister Imran Khan in 2019, the $6 billion bailout package repeatedly stalled after his government reneged on subsidy agreements and failed on its tax collection commitments outlined in the deal amid a yawning budget deficit.
The incumbent coalition government resumed the programme, and in August, it received around $1.17 billion under the seventh and eighth reviews of the Extended Fund Facility (EFF).
But the programme hit a bump in the road again in September — when the ninth review was due — after the authorities failed to live up to their promises with the lender and introduced a host of fiscal measures in contravention to the conditions agreed.
Finally, as the forex reserves continued to deplete to dangerously low levels, the government, having no choice but to take the plunge, agreed to the bitter IMF prescription to avoid the pains of default that would have created a Sri Lanka-like situation in the inflation-battered country.
