Pakistan’s proposed 37-month Extended Fund Facility (EFF) remains absent from IMF’s September executive board meetings scheduled

The International Monetary Fund (IMF) has not yet listed Pakistan’s new 37-month Extended Fund Facility (EFF) worth $7 billion on the agenda for its upcoming Executive Board meetings through September 18, 2024. The scheduled meetings on September 9, 13, and 18 do not include the new EFF agreement, according to the IMF’s official website.

Earlier this year, Pakistan concluded a $3 billion Standby Arrangement (SBA) with the IMF, aimed at strengthening the country’s foreign exchange reserves and alleviating external financial pressures. Following this, a staff-level agreement for the new EFF was reached on July 12, but it requires formal approval from the IMF’s Executive Board.

Approval is contingent upon Pakistan securing necessary financing assurances from its development and bilateral partners. The Pakistani government is negotiating a $12 billion loan rollover with key allies, including China, Saudi Arabia, and the UAE. Additionally, it has requested an extra $1.2 billion loan from Saudi Arabia to cover a $2 billion financing gap.

Finance Minister Muhammad Aurangzeb has expressed confidence that the IMF’s Executive Board will approve the EFF on schedule. He noted that Pakistan is in the advanced stages of securing the required external financing assurances.

As of now, Pakistan’s foreign exchange reserves held by the State Bank of Pakistan (SBP) stand at $9.44 billion, a notable increase from $3.54 billion in mid-June 2023, before the completion of the IMF’s previous facility. Despite this improvement, the new IMF programme remains crucial for Pakistan’s economy, which continues to face challenges in implementing necessary reforms without IMF-backed support.

Analysis

Political:
The delay in including the EFF on the IMF Executive Board agenda reflects ongoing challenges in Pakistan’s financial negotiations and the complexities of securing international support. The situation underscores the political and economic pressure on the Pakistani government to finalize external financing arrangements.

Economic:
The absence of the EFF from the IMF’s immediate agenda could impact Pakistan’s economic stability and reform efforts. The new EFF is essential for addressing Pakistan’s financing needs and supporting its economic reforms. The increased foreign exchange reserves provide some cushion but are insufficient without the structured support of an IMF programme.

Social:
The IMF programme’s delay may affect public perception and confidence in the government’s ability to manage the economy. Economic stability is crucial for social welfare and public confidence, making the timely approval of the EFF a key issue for citizens and stakeholders.

Racial:
While the immediate focus is on financial negotiations, the implications of the IMF programme are relevant to broader social and economic dynamics in Pakistan, including regional disparities and the impact on different socio-economic groups.

Gender:
Finance Minister Muhammad Aurangzeb’s optimism about the EFF approval reflects the role of leadership in navigating economic challenges. The impact of IMF programmes on gender equality and social support systems remains an indirect but significant consideration.