The Executive Board of the International Monetary Fund (IMF) on Thursday approved a $700 million loan tranche for Pakistan, boosting the cash-strapped country’s foreign exchange reserves.
The loan was released after the council completed its first review of Pakistan’s economic reform program supported by the Stand-by Arrangement (SBA), the finance ministry said in a post on X.
Under the $3 billion arrangement, Pakistan received $1.2 billion from the IMF as the first tranche – the remaining two are under review. The first one was completed, the next one will be in December.
The Treasury Department added that the completion of the review allows for the immediate disbursement of approximately $700 million, bringing total payments under the SBA to $1.9 billion.
Dr Khaqan Hasan Najeeb, a financial expert, told that it is important for Pakistan to approve the first revision as its external financing needs of $25 billion require it to remain with the IMF.
“The $700 million from the IMF and multilateral fund flows will not only support the reserves of state-owned banks, but also add confidence to the markets,” Najeeb added.
When the Pakistan Democratic Movement (PDM) was about to end its tenure last year, Pakistan was on the verge of insolvency. However, entering into an SBA with the IMF helped the South Asian nation avert sovereign bankruptcy.
Foreign reserves held by the State Bank of Pakistan (SBP) as of January 5 stand at $8.1 billion, while the country’s total reserves reached $13.2 billion after $66 million in debt was repaid.
With the addition of the latest tranche, Pakistan’s foreign exchange reserves will reach a six-month high – on July 14, the SBP’s reserves were around $8.73 billion.
With the second review pending, Najeeb said going forward, it is extremely important that Pakistan meet all targets, quantitative performance criteria and indicative targets as well as structural criteria due on December 31.
“The second review, which starts sometime in February, must also be completed for the last tranche,” he added.
