According to reports in the media, Pakistan and the International Monetary Fund (IMF) have agreed in principle to prolong the delayed bailout program for up to a year and increase the loan size to $8 billion, providing markets with much-needed stability and breathing space for the incoming government.
Sources told The Express Tribune on Sunday that Pakistan Finance Minister Miftah Ismail and IMF Deputy Managing Director Antoinette Sayeh have reached an agreement in Washington.
The IMF has agreed to extend the program for another nine months to one year, subject to final details, as opposed to the initial end date of September 2022, according to the sources.
According to a senior government official who requested anonymity, the loan’s size will be boosted from $6 billion to $8 billion, a net increase of $2 billion.
The former PTI-led government and the IMF had agreed to a $6 billion 39-month Extended Fund Facility (July 2019 to September 2022). However, the previous government did not follow through on its promises, and the initiative was halted for the most of the time because $3 billion remained unpaid.
Islamabad will have to agree on a budget blueprint for the following fiscal year 2022-23 before putting Pakistan’s case to the IMF Board for approval, according to the sources.
In addition, Prime Minister Shehbaz Sharif’s government would have to show that it would reverse some of the past regime’s wrongdoings in violation of the obligations it made to the IMF Board in January of this year.
Pakistan is going through a period of political and economic instability, and the decision to continue in the IMF programme for longer than the original period will bring clarity to economic policy and calm the rattled markets.