IMF official confirms funding assurances to Pakistan from friendly nations

• Nathan Porter highlights “remarkable” economic recovery.
• “What we’ve seen are benefits from taking good policies,” he says.
  
• IMF official emphasizes sustainable growth through increasing tax revenues.

WASHINGTON: After the Executive Board of the International Monetary Fund (IMF) approved a new bailout package for Pakistan, an official of the Washington-based lender confirmed that the country has also secured assurances of funding from friendly nations. The News reported on Friday.

China, Saudi Arabia and the United Arab Emirates have given Islamabad “significant financing assurances” linked to the country’s $7 billion Extended Fund Facility (EFF), according to IMF chief of mission to Pakistan Nathan Porter.

The financial assurances from the countries go beyond the agreement to transfer $12 billion in bilateral loans to those countries, the official added.

“I won’t go into details, but the United Arab Emirates, China and the Kingdom of Saudi Arabia have provided significant funding assurances that have gone into this program,” Porter told reporters virtually.

The IMF official’s statement echoes Finance Minister Muhammad Aurangzeb’s statements last month where he claimed that the aforementioned countries had confirmed the renewal for three years with the renewal taking place every year.

The IMF’s Executive Board on Wednesday approved a new $7 billion, 37-month loan agreement for Pakistan, which requires “right policies and reforms” to boost macroeconomic stability. The approval unleashes an immediate disbursement of $1 billion to Islamabad.

The crisis-torn South Asian country has had 22 previous IMF bailouts since 1958.

Porter said the country had made a “truly remarkable” economic recovery since mid-2023, with inflation falling dramatically, exchange rates stable and foreign reserves more than doubling.

“So what we’ve seen is the benefits of having good policies,” Porter said, adding that the challenge now was to build stronger and sustainable growth by keeping monetary, fiscal and exchange rate policies consistent, raising more taxes and improving public spending. .

Last year, Pakistan achieved its first primary fiscal surplus in 20 years, and the program calls for increasing it to 2 percent of gross domestic product (GDP). Porter said it depends in part on reforms to improve collections from undertaxed industries such as retailers.

The next review of the loan will likely take place in March or April 2025, based on performance criteria at the end of 2024, the head of the IMF mission in Pakistan said.