https://arab.news/bbdd5
- Pakistan last month reached IMF staff-level deal, board to review next loan tranche
- Government pursues Panda bond, taps China, Saudi support for financing
KARACHI: The International Monetary Fund said on Thursday Pakistan’s economic reform program is on track and a new loan tranche is expected soon, as Islamabad moves to secure external financing and manage the impact of rising global prices amid regional tensions.
Last month the IMF and Pakistan reached a staff-level agreement on the South Asian nation's loan program, a key step toward unlocking $1.2 billion in funding. The agreement, which requires IMF board approval, would give Pakistan access to $1 billion under the Extended Fund Facility and $210 million under the Resilience and Sustainability Facility, bringing disbursements under the ongoing program to $4.5 billion.
Pakistan’s macroeconomic position has improved under the IMF program, approved in Sept. 2024, with the current account deficit narrowing sharply, inflation easing from peak levels, and foreign exchange reserves stabilizing after a period of acute external stress. The adjustment has been driven by tighter fiscal and monetary policy, a market-determined exchange rate and import controls, though economic growth remains subdued and external vulnerabilities persist.
“Strong program implementation has helped Pakistan maintain macroeconomic stability and build confidence. Sound policies and deeper structural reforms remain key to sustaining growth and raising welfare for all Pakistanis,” Kristalina Georgieva said in a post on X after meeting Finance Minister Muhammad Aurangzeb on the sidelines of the World Bank-IMF Spring Meetings.
Jihad Azour, the IMF’s Middle East and Central Asia Director, said separately that the program was progressing and the Fund expected to go to its executive board soon to approve the next tranche.
Pakistan has been working to diversify its financing sources as it looks to reduce reliance on traditional external borrowing and strengthen its foreign exchange position.
In that context, Finance Minister Aurangzeb met Pan Gongsheng, governor of China’s central bank, the People’s Bank of China, in Washington to discuss financial cooperation and access to Chinese capital markets.
Islamabad is seeking support for the approval of its planned inaugural Panda bond, or yuan-denominated sovereign debt issued in China’s domestic bond market, which would mark Pakistan’s first attempt to raise funds directly from Chinese investors. Officials had earlier targeted an early 2026 timeline for the issuance, but it has yet to materialize, indicating delays as Pakistan works through regulatory approvals and market conditions.
Pakistan’s foreign exchange reserves have also been supported by recent financial assistance from Saudi Arabia, including deposit rollovers, as the country navigates external financing pressures.
The government has taken steps to cushion the impact of rising global prices linked to the conflict in the Middle East, including targeted subsidies and demand management measures, while maintaining exchange-rate flexibility under the IMF program.