Islamabad, July 13 (EFE).- Pakistan on Thursday celebrated the International Monetary Fund’s (IMF) decision to approve a critical stand-by agreement, providing $3 billion to the financially strained country over nine months.
Government spokesperson Marriyum Aurangzeb said Pakistan had averted the risk of default.
“We welcome the IMF board’s decision to approve funds and definitely Pakistan is out of risk of a default now,” Aurangzeb told EFE on Thursday.
Earlier IMF board, in a meeting in Washington, approved a 9-month stand-by arrangement for Pakistan for about $3 billion to support the government’s economic stabilization program.
An IMF statement said the arrangement came at a challenging economic juncture for the country.
“A difficult external environment, devastating floods, and policy missteps have led to large fiscal and external deficits, rising inflation, and eroded reserve buffers in FY23,” the statement said.
It said the program would provide a policy anchor for addressing domestic and external imbalances and a framework for financial support from multilateral and bilateral partners.
“The executive board’s approval allows for an immediate disbursement of (about $1.2 billion),” said the IMF, adding that the remaining amount will be phased over the program’s duration, subject to two quarterly reviews.
Prime Minister Shehbaz Sharif said the approval was a significant step forward in the government’s efforts to stabilize the economy and achieve macroeconomic stability.
“It bolsters Pakistan’s economic position to overcome immediate- to medium-term economic challenges, giving next government the fiscal space to chart the way forward,” the prime minister tweeted.
The government and the lender had reached a staff-level agreement on June 30.
The long-delayed agreement comes after the government adopted some changes to its annual budget, including imposing new taxes and reducing government spending as demanded by the global lender.
Under the adjustments, the government agreed to raise a further 215 billion Pakistani rupees ($755 million) in new taxes and to cut around $298 million in government spending along with several other measures to shrink the fiscal deficit.
On Tuesday, Finance Minister Ishaq Dar said Saudi Arabia had deposited $2 billion with the central bank of Pakistan in financial support, boosting foreign exchange reserves when the country barely had enough to cover a month of controlled imports.
A day later, the State Bank of Pakistan had received a deposit of $1 billion from the United Arab Emirates as external financing, also demanded by the IMF.
The IMF deal will unlock more bilateral and multilateral financing.
Dar said on Wednesday that the country expects foreign exchange reserves to rise to $15 billion by the end of this month. EFE