Bloomberg – Pakistan secured a bailout from the International Monetary Fund to avert an imminent default as political turmoil and deadly flooding threaten the South Asian nation’s economy.
The country can withdraw 894 million of the IMF’s special drawing rights, the Washington-based lender said in a statement on its website Monday. That’s the equivalent of about $1.16 billion. Finance Minister Miftah Ismail announced the IMF board’s approval of the funds in a post on his Twitter account earlier in the day.
The funds will be key to stabilizing Pakistan’s economy after surging energy costs eroded the nation’s foreign-exchange reserves and stoked Asia’s second-fastest inflation. The nation needs $31 billion in total financing through June 2023, while it is projected to have secured $38 billion. The IMF decision will also pave the way for more aid from friendly nations.
“The immediate priority is to continue the steadfast implementation of the recently approved budget for fiscal 2023, adherence to a market-determined exchange rate, and pursuit of a proactive and prudent monetary policy,” the fund said, adding the executive board also approved Pakistan’s request for waivers of non-observance of performance criteria.
Pakistan has had a tumultuous track record with the IMF. The government secured a bailout program in 2019 only to have it stall several times due to Islamabad’s failure to meet some loan conditions. Prime Minister Shehbaz Sharif’s government, since taking office in April, has reversed energy subsidies, imposed fresh taxes and unveiled austerity measures to avert what would be the second default in Asia this year after Sri Lanka.
The bailout also comes as Islamabad faces fresh challenges due to precarious political settings and a renewed climate crisis. Former premier Imran Khan is waging a fierce campaign against the government to press for fresh elections, while catastrophic floods cost the economy billions of dollars.
Flooding from the highest rainfall in more than three decades has killed at least 1,000 people since June and caused more than $10 billion worth of damage.
Pakistan’s dollar bonds, currency and stocks have pared some losses this month on expectation of the nation resuming its IMF program. Pakistan’s dollar bonds are the top performer in Asia in August, while the rupee has gained about 7% in August so far. The nation’s stocks, meanwhile, have rallied 8%, the top performer in Asia after Sri Lanka.