Pakistani Authorities in Discussions with IMF for Financial Support
Discussions are currently underway between Pakistani authorities and the International Monetary Fund (IMF) with the objective of quickly reaching an agreement on financial support. Nathan Porter, the IMF’s Mission Chief to Pakistan, stated that the Pakistani authorities have recently implemented decisive measures to align their policies with the economic reform program. These measures include the passage of a budget that expands the tax base and allows for increased social and development spending. Additionally, steps have been taken to improve the functioning of the foreign exchange market and tighten monetary policy in order to address inflationary and balance of payment pressures, particularly affecting vulnerable sectors.
Prime Minister Shehbaz Sharif expressed optimism that a decision on the IMF bailout program will be reached within a day or two, as Pakistan continues to meet the lender’s requirements. The Prime Minister had a phone call with IMF Managing Director Kristalina Georgieva, following three previous meetings during the New Global Financial Pact summit in Paris. The discussion focused on matters related to the stalled bailout program, and the Prime Minister emphasized his determination to improve the country’s economic situation through collaborative efforts.
Concerns have been raised by rating agencies and economists regarding Pakistan’s ability to fulfill its foreign debt obligations if it fails to secure the $1.1 billion loan tranche from the IMF’s Extended Fund Facility (EFF). To address this, Finance Minister Ishaq Dar and his team have made significant efforts to revive the loan, with discussions taking place during the summit in Paris. The Finance Minister expressed confidence that positive news regarding the stalled bailout package will be announced in the coming days.
The South Asian nation is currently facing severe economic challenges, characterized by high inflation and interest rates. As the June 30 deadline for the expiration of the bailout program approaches, the government has revised its FY24 budget and increased policy rates to 22% in an attempt to secure the deal. The successful completion of the IMF program is crucial for Pakistan to unlock additional external financing opportunities and address its financial constraints.
Key Points:
- Pakistani authorities are in discussions with the IMF to reach an agreement on financial support.
- Recent measures by the government align policies with the economic reform program, including the passage of a budget and steps to improve the foreign exchange market and tighten monetary policy.
- Prime Minister Shehbaz Sharif expects a decision on the IMF bailout program within a day or two, while efforts are being made to meet the lender’s demands.
Published in PakWeb, June 28, 2023.
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