Pakistan has received “significant financing assurances” from China, Saudi Arabia and the United Arab Emirates linked to a new International Monetary Fund (IMF) program that go beyond a deal to roll over $12 billion in bilateral loans owed to them by Islamabad, IMF Pakistan Mission Chief Nathan Porter said on Thursday.
Porter declined to provide details of additional financing amounts committed by the three countries but said they would come on top of the debt rollover.
The IMF's Executive Board on Wednesday approved a new $7 billion loan for cash-strapped Pakistan, more than two months after the two sides said they had reached an agreement.
The loan — which Islamabad will receive in installments over 37 months — is aimed at boosting Pakistan's ailing economy.
“I won't go into the specifics, but UAE, China and the Kingdom of Saudi Arabia all provided significant financing assurances joined up in this program,” Porter told reporters on a conference call.
The global lender said its immediate disbursement will be about $1 billion.
In a statement issued Thursday, the IMF praised Pakistan for taking key steps to restore economic stability. Growth has rebounded, inflation has fallen to single digits, and a calm foreign exchange market have allowed the rebuilding of reserve buffers.
But it also criticized authorities. The IMF warned that, despite the progress, Pakistan’s vulnerabilities and structural challenges remained formidable.
It said a difficult business environment, weak governance, and an outsized role of the state hindered investment, while the tax base remained too narrow.
“Spending on health and education has been insufficient to tackle persistent poverty, and inadequate infrastructure investment has limited economic potential and left Pakistan vulnerable to the impact of climate change,” it warned.
Prime Minister Shehbaz Sharif in a statement hailed the deal that his team had been negotiating with the IMF since June.
Sharif, on the sidelines of the United Nations General Assembly, told Pakistani media that the country had fulfilled all of the lender’s conditions, with help from China and Saudi Arabia.
“Without their support, this would not have been possible,” he said, without elaborating on what assistance Beijing and Riyadh had provided to get the deal over the line.
The Pakistani government has vowed to increase its tax intake, in line with IMF requirements, despite protests in recent months by retailers and some opposition parties over the new tax scheme and high electricity rates.
Pakistan for decades has been relying on IMF loans to meet its economic needs.
The latest economic crisis has been the most prolonged and has seen Pakistan facing its highest-ever inflation, pushing the country to the brink of a sovereign default last summer before an IMF bailout.
Inflation has since tempered, and credit ratings agency Moody’s has upgraded Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to “Caa2” from “Caa3”, citing improving macroeconomic conditions and moderately better government liquidity and external positions.
