The International Monetary Fund’s (IMF) Executive Board is set to vote on a short-term bailout program for Pakistan, providing much-needed financial support for the cash-strapped country. The program, worth $3 billion, aims to ease fears of default and boost investor confidence in Pakistan’s economy.
On June 30, Pakistan received approval for a nine-month Standby Agreement (SBA) with the IMF, securing a $3 billion arrangement. This approval brought some relief to the country, as it faced the risk of default and saw its bond yields recover. The agreement also provided reassurance to international investors.
New Program and Inflows Could Boost Pakistan’s Forex Reserves
The new IMF program, spanning nine months, guarantees $3 billion in funding for Pakistan. If the program is approved, it would significantly increase the foreign exchange reserves held by the State Bank of Pakistan (SBP). In addition, recent inflows of $2 billion from the Kingdom of Saudi Arabia have further bolstered Pakistan’s reserves. The upcoming vote by the IMF Board has the potential to push SBP reserves above $7 billion.
