IMF approves $1.1bn bailout package for Pakistan

The IMF has approved the disbursement of more than $1.1bn to Pakistan, reviving a stalled $7bn assistance package expected to help stave off default despite a severe economic crunch and devastating floods.

The IMF’s board in Washington authorized the expenditure after Prime Minister Shehbaz Sharif’s government introduced austerity measures, including sharply increasing domestic fuel prices.

“The formal resumption of an IMF program is a major step forward in our efforts to put Pakistan’s economy back on track,” Sharif wrote on Twitter. Antoinette Sayeh, deputy managing director and acting chair of the IMF’s executive board, said maintaining the reform measures would be crucial.

“Steadfast implementation of corrective policies and reforms remains essential to regain macroeconomic stability, address imbalances and lay the foundation for inclusive and sustainable growth,” she said, including strengthening governance at state-owned enterprises. But the unpopular austerity measures have proved politically perilous at a tumultuous time for the country of 220mn. Inflation has soared, with a basket of “sensitive” food and fuel prices last week rising 45 per cent from a year earlier. Flooding has killed more than 1,000, affected more than 30mn people and destroyed rice and cotton crops. The government hopes that financial assistance from the IMF, as well as China and Saudi Arabia, will buy time for inflation to ease ahead of polls, which must be held by the second half of next year.

“I could see why people would not be so enthusiastic but my take is this: if I’d let this country default — two or three months ago it would have defaulted — things would have been much worse,” Miftah Ismail, Pakistan’s finance minister, told the Financial Times in an interview. (www.ft.com)