IMF changes position on releasing loan tranches

The approval of the $1.2 billion loan tranche from the International Monetary Fund (IMF) was conditional on Pakistan’s ability to timely obtain ‘adequate assurances’ from friendly nations for additional loans to close the funding gap on Tuesday, leaving Islamabad open to demands from its bilateral creditors.

Esther Perez, the IMF’s resident representative, stated in a succinct statement that “the last preparatory action for the combined 7th and 8th review has been met with the rise in PDL (Petroleum Development Levy) on July 31.”

As opposed to the previous schedule of the $2 billion, the merger will allow for the release of an approximately $1.2 billion tranche.

Esther didn’t, however, provide a specific date for the board meeting because the IMF believes there is a mismatch between Pakistan’s gross external funding needs and what Pakistan has available.

“The board meeting is tentatively planned for late August once adequate financing assurances are confirmed,” Esther Perez said.

Two days after the Ministry of Finance and the State Bank of Pakistan asserted that they had satisfied the financing requirements for the current fiscal year, the IMF made the surprise announcement.

General Qamar Javed Bajwa, the chief of the army staff, has also pleaded with the US to assist Islamabad in obtaining an early distribution of $1.2 billion. General Qamar Javed Bajwa and US Deputy Secretary of State Wendy Sherman have spoken, the Foreign Office confirmed on Friday.

It appears that the contacts did not assist Pakistan in obtaining a fixed date for an early board meeting. Islamabad would need to persuade the three major bilateral creditors to formally confirm to the IMF their willingness to contribute $4 billion in finance.