'Default risk': IMF sets new condition for Pakistan

ISLAMABAD: The International Monetary Fund (IMF) is looking to assess Saudi Arabia’s commitment to financing Pakistan before the global lender disburses fresh funds to the South Asian nation, ARY News reported quoting Bloomberg.  

Bloomberg, while quoting familiar sources, reported that the IMF wants to ensure that Saudi Arabia will follow through with as much as $4 billion in funding to Pakistan to ensure Islamabad does not have a funding gap after the IMF loan.

The transfer could include special drawing rights, the sources added.

The matter is crucial because, while the IMF is due to lend Pakistan $1.2 billion, this would be insufficient for Prime Minister Shehbaz Sharif’s government to avoid a debt default, the publication reported.

According to the report, Pakistan needs at least $41 billion in the next 12 months to fund debt repayments and boost foreign exchange reserves. “If there’s a risk of default, the IMF’s board may not approve release of the cash,” it added.

Earlier on July 14, the International Monetary Fund (IMF) and Pakistan reached a staff-level agreement for the release of US$1.17 billion under the combined 7th and 8th reviews of Pakistan’s Extended Fund Facility (EFF).

A statement issued by the Fund said that the agreement is subject to approval by the IMF’s Executive Board.

“Additionally, in order to support program implementation and meet the higher financing needs in FY23, as well as catalyze additional financing, the IMF Board will consider an extension of the EFF until end-June 2023 and an augmentation of access by SDR 720 million that will bring the total access under the EFF to about US$7 billion.”