According to Reuters, the International Monetary Fund (IMF) has stated that Pakistan, which is currently battling a financial crisis, needs additional significant financing to complete the ninth review of the stalled bailout program. The IMF emphasized that it is essential for Pakistan to secure significant additional financing commitments before the board approves the release of the pending funds, which are crucial for the government to address the acute balance of payments crisis.
Due to several reasons, the release of the $1.1 billion tranche, part of a $6.5 billion IMF package, has been delayed since November last year. This delay is the longest hiatus since 2008.
The IMF welcomed the financing committed by Pakistan’s external partners. Countries such as the United Arab Emirates, Saudi Arabia, and China pledged to support Pakistan in March and April and cover part of the funding deficit. During a scheduled press conference, IMF spokeswoman Julie Kozack emphasized that the institution’s team is heavily engaged with Pakistani authorities regarding the challenging situation they are facing.
Pakistan’s economy is facing stagflation, and it has very high financing needs. Also, it has been affected by various shocks, including severe floods, as Kozack stated.
IMF has confirmed that Pakistan will not implement a cross-subsidy program, introduce new tax exemptions, and will durably allow a market-based exchange rate for the currency. Bloomberg reported that Prime Minister Shehbaz Sharif proposed to charge affluent consumers more for fuel, with the raised money used to subsidize prices for the poor who have been adversely affected by inflation. The proposed scheme was seen as one of the reasons for the delay in implementing the IMF bailout.
Meanwhile, the State Bank of Pakistan’s (SBP) foreign exchange reserves reported a decline in their value to $4.38 billion. This number was recorded on May 5, indicating the urgency of Pakistan’s financial situation.