Funding News: Pakistan gets Saudi’s approval for $2 billion funding to secure IMF bailout

ISLAMABAD: Cash-strapped Pakistan has received the nod for funding of up to $2 billion from Saudi Arabia, a move that will help the country secure the much-required bailout from the IMF, according to a media report on Thursday.

The International Monetary Fund has imposed the condition on Pakistan that it should secure $3 billion from other countries for the revival of its $6.5 billion bailout package.

The assistance from Riyadh comes at a crucial time as the IMF programme, signed in 2019, will expire on June 30, 2023, and under the set guidelines, the programme cannot be extended beyond the deadline, The Express Tribune newspaper reported.

Last month, Pakistan received a rollover loan of $2 billion from its “all-weather” ally China.

According to the report, the finance ministry sources said the IMF was still insisting on its demand for a further increase in the interest rate according to inflation and opposing the annual subsidy of Rs 900 billion.

The Washington-based global lender was unwilling to budge from its demand for Pakistan to collect Rs 850 billion in terms of the petroleum development levy (PDL), the report said.
Pakistan, currently in the throes of a major economic crisis, is grappling with high external debt, a weak local currency and dwindling foreign exchange reserves, enough to shore up for barely one month’s imports.

The IMF said the cash-starved country had a few more tasks before it could unlock a USD 6.5 billion loan to avoid a default, putting pressure on the government to secure assurances from countries that have promised financing support.

Esther Perez Ruiz, the IMF’s resident representative for Pakistan, said a staff-level agreement would follow once the few remaining points were closed, the report added.

Finance Minister Ishaq Dar is also said to meet the leadership of the UAE before leaving for the US on April 10 to attend the upcoming Annual Spring Meeting of the Bretton Wood Institutions (BWIs), known as the International Monetary Fund and the World Bank, from April 10 to 16.

Last month, the IMF said Pakistan had made “substantial progress” toward meeting policy commitments needed to unlock loans the country needs to avoid default. Pakistan has taken tough measures including increasing taxes and energy prices, and allowing its currency to weaken to restart the $6.5 billion IMF loan package, it said.

IMF has received Saudi Arabia’s commitment to provide funds for Pakistan: minister

Minister of State for Finance and Revenue Dr Aisha Ghaus Pasha said on Thursday that the International Monetary Fund (IMF) has received a commitment from Saudi Arabia regarding funding for Pakistan.

Last month, Finance Minister Ishaq Dar had said that financing commitments from friendly countries were the last hurdle in securing the IMF deal, which Pakistan needs to stave off default.

In a parliamentary address last week, Prime Minister Shehbaz Sharif had also said that the IMF wants external financing commitments fulfilled from friendly countries before it releases bailout funds.

The international lender has been negotiating with Islamabad since early February to resume $1.1 billion in funding held since November, which is part of a $7 billion bailout agreed in 2019.

With central bank reserves falling to critical levels, hardly enough for four weeks of imports, the IMF tranche is critical for the country as it will also unlock other external financing avenues, helping Pakistan avert a default on its obligations.

“IMF has indicated to us that they received correspondence from Saudi Arabia on the funding commitment,” Pasha said.

“Our situation has improved and talks with UAE are also underway,” Pasha said, adding that Pakistan would need a similar commitment from the Emirates as well before things with the IMF progress.

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