Pakistan Secures $1 Billion from IMF as Part of $7 Billion Bailout Program

The International Monetary Fund (IMF) has also agreed to provide the immediate release of around USD 1 billion to Pakistan under the existing Extended Fund Facility (EFF), announced on Friday by the Prime Minister's Office (PMO).

Prime Minister Shehbaz Sharif welcomed the IMF approval of this USD 1 billion tranche and underscored the failure of India's attempts to impact the decision. His office statement pointed out that the disbursement is a major milestone for Pakistan, in spite of India's efforts to discredit it.

India had already expressed its doubts about the success of IMF programs for Pakistan due to its abysmal record, and questioned whether the debt financing was going to be used for state-sponsored terrorism. New Delhi had been against the IMF's offer to give further loans of USD 2.3 billion to Pakistan on the fear that the money might be used to finance terrorism in other countries.

During the IMF board meeting on Friday, which considered the EFF lending facility (USD 1 billion) and also the new Resilience and Sustainability Facility (RSF) program (USD 1.3 billion) for Pakistan, India officially lodged its protest. India abstained from voting on the issue.

In its statement, the Indian finance ministry said that rewarding Pakistan's continued patronage of cross-border terrorism would be a perilous precedent, putting international funding agencies at risk of reputational damage and compromising global values.

India's opposition at the IMF is also happening in the backdrop of increased tensions between the two countries, with war between India and Pakistan increasing. The PMO at Islamabad responded by making a statement in which it said that the economic conditions of Pakistan are improving and the country is moving towards development. It also accused India of trying to thwart Pakistan's development and the IMF program through aggressive tactics.

The statement also pointed out that the IMF's move would stabilize the economy of Pakistan and steer it towards recovery in the long run, with tax reforms, enhanced performance of the energy sector, and private sector growth as top priorities. The recent positive economic signals are indicative of the government policies, added the PMO.

After the IMF board approval, the prompt release of USD 1 billion takes total disbursement under the loan program to around USD 2 billion. According to the loan terms, Pakistan will receive seven equal payments of around USD 1 billion upon successful completion of seven biannual reviews.

Pakistan and the IMF had earlier on committed themselves to a three-year, USD 7 billion package of aid in July that would help stabilize the macroeconomic conditions of the country as well as build momentum for sustainable and inclusive growth. The IMF and Pakistan had agreed on a staff-level deal of the first biannual review in March, which comprised fundamental reforms including imposing a carbon levy, revising electricity tariffs, increasing water charges, and opening up the automobile sector.