Pakistan makes formal request to IMF for another bailout

Author: Noor ul Ain Ali

Pakistan has formally requested the International Monetary Fund (IMF) for a new bailout package, aiming for a sum between $6 to $8 billion under the Extended Fund Facility (EFF). The potential inclusion of climate financing could augment this amount, as reported by The News on Saturday.

However, the precise size and timeline of the bailout will only be finalized once a consensus is reached on the key aspects of the program, expected to occur in May 2024.

Efforts to reach out to members of the Pakistani delegation, currently attending the annual spring meetings of the IMF/World Bank in Washington, yielded no response at the time of filing this report.

Pakistan has expressed its desire for an IMF review mission to be dispatched in May 2024 to solidify the details of the proposed three-year bailout package under the EFF program.

Despite optimistic portrayals of the economy by Pakistani authorities, the IMF’s latest Regional Economic Outlook (REO), released by the Middle East and Central Asia (ME&CA) department, highlighted concerns over Pakistan’s external buffers, citing ongoing debt service obligations, including Eurobond repayments.

The report advised countries facing inflationary pressures, including Pakistan, to maintain tight monetary policies and adopt a data-dependent approach, while monitoring the risk of inflationary reversals.

Following a contraction in 2023, Pakistan’s growth is projected to rebound to 2% in 2024, driven by favorable base effects in the agriculture and textile sectors. Conversely, Morocco’s growth projection has been revised downward to 3.1%, primarily due to slowing domestic demand.

Looking ahead, growth in Middle East and North Africa (MENA) emerging market and middle-income economies (EM&MIs), including Pakistan, is expected to accelerate to nearly 4% in 2025. However, persistent challenges such as high debt levels and inflation, along with structural impediments, are anticipated to constrain medium-term economic activity, keeping growth below historical averages in most economies.