Pakistan requests $6-8 billion IMF bailout package

Pakistan has formally requested a bailout package from the International Monetary Fund (IMF) in the range of $6 to $8 billion under the Extended Fund Facility (EFF), with the possibility of additional funding through climate financing. The exact size and timeframe of the package will be determined after reaching a consensus on the major aspects of the program in May 2024.

The IMF's latest Regional Economic Outlook highlighted that Pakistan's external buffers have weakened due to ongoing debt service obligations, including Eurobond repayments. The report emphasized the need for tight monetary policy to address inflationary pressures and urged a data-dependent approach.

Despite a contraction in 2023, Pakistan is projected to experience a 2% growth in 2024, driven by positive base effects in the agriculture and textile sectors. Looking ahead, growth in Pakistan and other Middle East and Central Asia economies is expected to accelerate to nearly 4% in 2025, following constraints experienced in the previous year.

Finance Minister Muhammad Aurangzeb expressed optimism about Pakistan's economic potential, aiming for a $3 trillion economy by 2047. He indicated ongoing discussions with the IMF to secure a new loan, with expectations of at least $6 billion in funding. Additionally, Pakistan plans to seek further financing under the Resilience and Sustainability Trust.

Aurangzeb also mentioned plans to re-enter international debt markets, potentially through a green bond issuance. Despite the positive outlook on debt rollovers, challenges remain in managing public sector financing needs, which are projected to increase significantly in the coming years.