Pakistan seeking Bangladesh-like deal with IMF

Islamabad: Pakistan is now seeking a Bangladesh-style deal with the International Monetary Fund (IMF) and is actively exploring the possibility of increasing the program to $7.5-8 billion, reportedly.

According to the media reports, Pakistan is considering various options to increase the bailout package of the International Fund.

Pakistan can increase the IMF fund from 6 billion dollars under the specific quota of special rights. It is also reported that Pakistan had requested the increase of the fund in the standby program of June 2023, however the IMF decided to postpone the matter till next program.

Climate finance will be sought to expand the Expanded Fund Facility program. The International Monetary Fund provides affordable long-term financing for countries dealing with climate change and pandemics.

According to the details, the Pakistani authorities are looking for options to increase the upcoming IMF bailout package to 7.5 to 8 billion dollars and one of the possibilities can be the application of climate finance with the Extended Fund Facility (EFF).

If this arrangement is finalized, Pakistan can increase the size of the program under the EFF from $6 billion to $7.5 to $8 billion, considering the specific quota available under Special Drawing Rights.

It has also been reported that Pakistan had discussed the possibility of increasing the size of the program when finalizing the last standby arrangement program in June 2023, but the IMF did not consider the request at the last minute arguing that this was a short-term program so the possibility could be explored next time.

Following Bangladesh's model, Pakistani authorities are now exploring the possibility of scaling up the upcoming program and climate finance will be sought to expand the EFF program.

The Resilience and Sustainability Facility (RSF) is an IMF instrument that provides affordable long-term financing to countries undergoing reforms to mitigate potential balance of payments stability risks. This includes climate change and pandemic preparedness.

The facility provides long-term financing to strengthen economic resilience and sustainability by (a) supporting policy reforms that reduce macro-critical risks associated with climate change and pandemic preparedness, and (b) such long-term by-expanding policy space and fiscal buffers to mitigate risks arising from long-term structural challenges.

Eligible countries requesting access to the RSF require high-quality policy reforms that address the long-term structural challenges of climate change or pandemic preparedness.

An IMF-supported program aligned with the Upper Credit Tranche Quality Policies (UCT Program). It can be financing or non-financing and should be under one of the following arrangements: SBA, EFF, PLL, FCL, SCF, ECF, PCI or P S.I. Emergency Financial Facilities (RFI, RCF), SMP, or SLL are not eligible.

Must have at least 18 months remaining in an accompanying UCT program. Sustainable debt and adequate repayment capacity. Linked to reform progress. Each move is associated with an RSF distribution.

A reform measure can be a single policy action or a set of closely related measures that comprise a single reform. If a measure involves multiple actions, all must be implemented to unlock the corresponding payment.

Reviews will take place concurrently with reviews under the UCT program, once the expected date of completion of the remedial action and the date of availability of the relevant distribution have passed.

This is expected to coincide with the remainder of the accompanying UCT program. Minimum tenure is 18 months and expires when all available funds have been distributed.

A concurrent UCT program automatically terminates upon termination, cancellation, or termination. A maturity of 20 years will have a grace period of 10.5 years during which no principal will be repaid. Borrowers pay affordable interest rates with marginal margins on the three-month SDR rate.