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Pakistan’s Plans for New IMF Loan: Finance Minister’s Insight

Pakistan's Finance Minister Muhammad Aurangzeb speaks during an interview with AFP at the Embassy of Pakistan in Washington, DC on April 15, 2024. Pakistan has initiated discussions with the IMF over a new multi-billion dollar loan.

Pakistan’s Finance Minister revealed the country’s aim to secure a new loan agreement with the International Monetary Fund (IMF) by May. The current $3 billion arrangement with the Fund is set to expire in late April, prompting Pakistan to seek a more substantial and longer-term loan.

The minister emphasized the importance of this new loan in achieving macroeconomic stability and implementing crucial structural reforms. He highlighted the upcoming discussions with the IMF mission in Islamabad, expected around mid-May, as pivotal in shaping the contours of the agreement.

During his attendance at the IMF and World Bank spring meetings in Washington, the minister met with the Fund’s Managing Director, Kristalina Georgieva, to discuss Pakistan’s economic reform program.

Pakistan aims to request a three-year program to support its reform efforts, with assurance from the minister that the new IMF deal would not lead to rapid devaluation of the rupee.

The IMF stressed the significance of prioritizing reforms over the size of the loan package, underlining the need for accelerated structural reforms to unleash Pakistan’s growth potential.

While the exact size of the loan program remains undisclosed, Pakistan also plans to seek additional financing from the Fund under the Resilience and Sustainability Trust.

Despite challenges, Pakistan has made progress in accumulating foreign exchange reserves, with projections to reach $10 billion by the end of June, providing a cushion against external pressures.

Regarding debt management, the minister expressed confidence, citing successful rollovers of bilateral debt, including from China. He assured that debt obligations for the fiscal years ahead are manageable.

Looking ahead, Pakistan eyes a return to international capital markets, possibly through a green bond issuance. However, improvements in sovereign ratings are prerequisite, with discussions initiated with ratings agencies.

Overall, while international capital market issuance is anticipated in the coming years, focus remains on fiscal stability, reforms, and enhancing Pakistan’s creditworthiness.

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