Pakistan has officially reached out to the IMF, asking for a financial lifeline in the form of a $6-$8 billion bailout package, hinting at the possibility of additional climate financing to bolster the aid. The country's Finance Minister, Muhammad Aurangzeb, is leading a delegation in Washington for the IMF/World Bank spring meetings, seeking to secure a new three-year bailout package under the Extended Fund Facility (EFF) through discussions and review missions scheduled for the upcoming month.
Despite some positive economic indicators, Pakistan faces challenges relating to its external finances as highlighted in the latest IMF report, which points out the strain caused by ongoing debt repayments, including Eurobonds. The IMF recently agreed at a staff level on the final review of Pakistan's stabilization program under a $3 billion standby arrangement from July last year, ensuring continued support and collaboration to address economic concerns. The IMF emphasized the importance of maintaining tight monetary policies and a data-driven approach in countries such as Egypt, Kazakhstan, Pakistan, Tunisia, and Uzbekistan where inflationary pressures persist.
Furthermore, Pakistan's economic growth is expected to rebound by 2% in 2024 following a contraction in 2023, driven by positive base effects in the agriculture and textile sectors. Finance Minister Aurangzeb outlined ambitious long-term growth projections for Pakistan, stating that the economy could potentially grow to USD 3 trillion by 2047 with the successful implementation of key reform agendas. To secure macroeconomic stability and institute necessary structural reforms, Pakistan aims to secure a new, larger IMF loan as its current $3 billion arrangement concludes at the end of April.
In a separate development, India has raised concerns about the potential utilization of IMF bailout funds by Pakistan, stressing the need for stringent oversight to prevent their diversion towards military expenditure or repayment of debts to other countries. India's executive director, Krishnamurthy Subramanian, highlighted these concerns during a recent evaluation of the $3 billion short-term Stand-By Arrangement provided to Pakistan, reflecting India's cautious stance and reservations regarding Pakistan's financial assistance requests.