The International Monetary Fund is seeking to assess Saudi Arabia’s commitment to funding Pakistan, before the multilateral lender disburses fresh funds to the South Asian nation, according to people familiar with the matter.
The Washington-based lender wants to make sure Saudi Arabia goes ahead with up to $4 billion in funding to Pakistan to ensure Islamabad. That does not have a funding gap after the IMF loan,” said the people. That asked not to be identified as discussing private deliberations. The transfer could include special drawing rights, they added.
The issue is crucial because, while the IMF must lend Pakistan $1.2 billion. This would be insufficient for Prime Minister Shehbaz Sharif’s government to avoid a debt default. Pakistan’s rupee and bonds are sinking as financing problems. That coupled with renewed political uncertainty, roils the country.
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Representatives of Pakistan’s IMF and Finance Ministry did not immediately respond to messages seeking comment.
The IMF is in talks with a country about the possible transfer of 2 billion SDRs ($2.6 billion), Pakistan’s Finance Minister Miftah Ismail said on July 20. Pakistan needs at least $41 billion over the next 12 months to finance debt payments. That increases foreign exchange reserves, which analysts such as Saad Khan of IGI Securities Ltd. anticipate will be met, but only barely.
Pakistan reached a staff-level agreement with the IMF last week to revive its bailout package. If there is a risk of default, the IMF board may not approve the release of cash.
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