Washington: All eyes are on the crucial Executive Board meeting of the International Monetary Fund (IMF) that is scheduled to meet today (Monday) for the disbursement of a $1.17 billion loan facility to Pakistan.
With the approval of the Board meeting, Pakistan will immediately get $1.17 billion.
On July 13, Pakistan and the IMF finally reached a staff-level agreement to complete the combined 7th and 8th reviews of Pakistan’s Extended Fund Facility (EFF) with an increased size of $7 billion.
According to a statement released by the Fund, the IMF staff team, led by Nathan Porter, finalized discussions with Pakistan for the combined seventh and eighth reviews of Pakistan’s economic program supported by the IMF Extended Fund Facility.
The statement stated that the agreement remains subject to approval by the IMF’s Executive Board, and the staff team will prepare a report that will be presented to the IMF’s Executive Board for discussion and decision.
Then, on August 12, Pakistan received the Letter of Intent (LOI) from the IMF.
The LOI is a preliminary document that declares one party’s intention do business with another – in this case, the IMF and Pakistan.
The receipt of the LOI signified that Pakistan’s deal with IMF to release two tranches worth $1.17 billion under a stalled loan facility was getting closer to the finish line.
Last week, the State Bank of Pakistan’s Acting Governor, Murtaza Syed, said that Pakistan is likely to receive a $1.17 billion loan tranche from the Fund within six days after the Executive Board’s approval.
He had said that the country’s forex reserves would shore up to $16 billion by the end of the FY23, which dropped to $8 billion due to delay in the revival of the IMF agreement and external flows.
Engulfed with heavy floods, Pakistan desperately needs the deal done today. Not doing so will send a negative signal, particularly during the floods.
Pakistan could also request emergency help from the IMF’s Rapid Financing Instrument (RFI), which may bring additional funds of up to $500 million. In April 2020, the board approved the disbursement of $1.386 billion to Pakistan under the RFI to address the economic impact of the Covid-19 shock.