Pakistan’s debt is still sustainable despite the nation experiencing one of its worst economic turmoils, according to Kristalina Georgieva, the International Monetary Fund’s (IMF) Managing Director, said on Friday.
Pakistan has met all the necessary requirements for receiving a critical $1.1 billion bailout from the international donor, as announced by the Pakistani government on Thursday. The funds are part of a $6.5 billion bailout package approved by the Fund in 2019, which is critical for Pakistan to avoid defaulting on external payment obligations.
However, the bailout’s disbursement has been delayed since November due to concerns about Pakistan’s fiscal policy adjustments. Furthermore, the country’s foreign exchange reserves currently amount to less than a month’s worth, making the IMF’s support crucial for the nation’s economic stability.
In the week ending April 7, foreign exchange reserves held by the State Bank of Pakistan (SBP) fell by $170 million due to external debt repayments, the central bank said. The SBP reserves stand at $4.03 billion, which is insufficient to cover even a month’s imports. Data from commercial banks showed that forex reserves stand at $5.5 billion, while the country’s total reserves are $9.6 billion.
Pakistan can only receive the funds after signing a staff-level agreement (SLA) with the IMF. The finance ministry confirmed that IMF Deputy Managing Director Antoinette Moniso Sayeh was confident that the SLA would be signed soon.
Speaking at a briefing in Washington, Georgieva said that the IMF has been working tirelessly with Pakistani authorities in order to prevent unsustainable debt levels by ensuring that the country has the necessary policy framework in place, reported by Reuters.
When asked about Pakistan’s potential to reach unsustainable debt positions like Sri Lanka, the IMF Managing Director responded: “It is best not to get there, and currently, we are not there yet.”
“My hope is that we can complete our current programme successfully with the goodwill of everyone and the implementation of the agreements already made by the Pakistan authorities,” Georgieva expressed optimism regarding the successful completion of the current programme.
Furthermore, the IMF requires Pakistan to provide an assurance that its balance of payments deficit is fully financed for the fiscal year ending in June to unlock the next tranche of IMF funding.
Pakistan’s government confirmed that it has fulfilled all requirements to receive the crucial bailout funds from the IMF following a meeting with IMF Deputy Managing Director Antoinette Moniso Sayeh, as stated in a news release by the finance ministry.
The IMF is in talks with friendly countries of Pakistan to provide financial assurances so that Pakistan completes the programme successfully.
Georgieva expressed hope that with goodwill and the implementation of the agreed-upon policies, the current programme would be completed successfully.