ISLAMABAD: Pakistan will submit a formal request to the International Monetary Fund (IMF) for a longer and larger bailout package under the Extended Fund Facility (EFF) next month, The News reported on Sunday.
The country is expected to seek a new IMF rescue package of over $8 billion, with the option of extending it through climate finance, at the upcoming spring meetings of the Breton Wood Institutions, known as the IMF/World Bank, to be held in Washington. DC, April 15-20.
The meeting will be attended by a Pakistani delegation led by Finance Minister Muhammad Aurangzeb and comprising Finance Minister Imdadullah Bosal, EAD Secretary Kazim Niaz and State Bank of Pakistan Governor Jamil Ahmed.
Pakistan has two options to apply for a longer and larger scope of the EEF programme. The first is that an inflation-stricken country can ask for its increased quota, as it did in 2008 when Islamabad secured 700% of its quota during the Pakistan People’s Party (PPP) government.
The second option is to extend the EDF through the Climate Finance Facility, as Pakistan qualifies for it due to the worst climate deterioration in recent years.
Pakistan can also combine the two options in view of the demand for a longer and larger program size from the Pakistani side, as the quota could be strengthened and expanded through climate finance.
According to sources, the IMF inspection mission is in Pakistan to complete the second review under the $3 billion Stand-by Arrangement (SBA) program and release the third and final tranche of $1.1 billion. However, discussions about a larger EFF program are ongoing.
If the negotiations end positively, then the global lender will release the final tranche of $1.1 billion by April 12.
“In view of the limited time frame, the IMF mission has shortened the negotiation period and will be in session from March 14 to 18 in order to prepare the draft Memorandum on Economic and Financial Policy (MEFP) within a limited time frame,” the sources confirmed. to Messages.
The Pakistani side may prefer to inform the IMF team about the next bailout orally, however the IMF team focused on discussing the ongoing SBA program.
There could be a similarity between Pakistan and Egypt’s IMF program as Egypt’s IMF financing was recently increased to $8 billion under strict conditions where the interest rate was increased by 600 basis points with a recent increase of 200% and an expected devaluation of 30%, an independent warned economists.
The South Asian country is exploring the possibility of applying to the IMF for the Resilience and Sustainability Facility (RSF), which provides countries with affordable long-term financing with reforms to reduce risks to future balance of payments stability, including climate-related risks. preparedness for change and pandemic.
It will provide long-term financing to strengthen economic resilience and sustainability by (i) supporting policy reforms that reduce macro-critical risks associated with climate change and pandemic preparedness, and (ii) expanding policy space and financial buffers to mitigate risks arising from such long-term structural challenges.
