(March 26): The International Monetary Fund is poised to disburse about US$2 billion (RM8.85 billion) to Pakistan in two separate loans, in a show of confidence by the global lender in the government’s economic reforms to rebuild the fragile South Asian economy.

“Pakistan has made significant progress in restoring macroeconomic stability and rebuilding confidence despite a challenging global environment,” according to a statement by the Washington-based lender as it reached a staff-level agreement with Pakistan. Pakistan’s benchmark KSE-100 Index rose 1.2%, the most in almost three weeks, after the market opened.

With this initial approval, the nation is in line to receive about US$1 billion as the second instalment of the total US$7 billion loan package it secured last year and received an equal amount then. In addition, Pakistan won a new 28-month arrangement under the Resilience and Sustainability Facility, or RSF, with total access of around US$1.3 billion, the statement said.

The financing from the IMF has been crucial in helping the country recover from a dollar shortage that brought the South Asian nation to the brink of an economic collapse in 2022. To meet the demands of the loan agreement, the government of Prime Minister Shehbaz Sharif has taken several ambitious steps, including raising a fuel tax, approving a law to tax agricultural income and attempting to sell a stake in state-owned Pakistan International Airlines.

Pakistani authorities reiterated in talks with the IMF their commitment to the programme and plan to supplement their efforts by advancing reforms to address long-standing economic vulnerabilities to climate shocks, according to the statement issued by the global lender.

The new RSF loan will support Pakistan in building resilience to natural disasters and enhancing budget and investment planning to promote climate adaptation, according to the statement.

Since the loan was approved last year, Pakistan’s foreign exchange reserves have increased and inflation has cooled, giving the country’s central bank room to support economic growth by cutting its key rate. Both Moody’s and Fitch upgraded Pakistan’s credit ratings last year.

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