Pakistan exploring options for IMF emergency flood loan


After Pakistan secured the revival of the major bailout deal through a staff-level deal with the International Monetary Fund (IMF), Islamabad is now weighing options to apply for an emergency loan from the financial institution for relief and salvage measures amid devastating floods that caused damage estimated at PKR 2.5 trillion.


According to initial estimates by the Ministry of Finance, the average inflation rate could sharply accelerate to 26% due to the disruption in the supply chain.

The 26% estimate is much higher than the IMF and State Bank of Pakistan (SBP) pre-flood projections of 18-20%.

According to the sources, the ministry has prepared the initial estimates of economic losses from the floods and is expected to present the report at a cabinet meeting with other stakeholders including the SBP and the Ministry of Planning.

“Once the amount of losses is agreed, the government will take the decision to approach bilateral and multilateral creditors for financial assistance,” said Aisha Pasha, state finance minister.

“The news from Pakistan is extremely distressing and my heart goes out to the victims and families affected by the severe flooding,” said Asian Development Bank President Masatsugu Asakawa.

According to Pasha, the first estimates indicate that the losses for the economy can reach 2,000 billion PKR.

The possibility of contacting the IMF for an emergency flood relief program is already being considered during consultations between Finance Minister Miftah Ismail and Prime Minister Shehbaz Sharif.

“Miftah Ismail raised the issue of IMF funding in a meeting related to the floods, which was also attended by Chief of General Staff Qamar Javed Bajwa,” a finance ministry source said.

According to Ismail, two funding instruments were currently being considered. However, he added that since the discussions and deliberations are only at the initial stage, no decision has yet been taken to approach the IMF.

The IMF previously approved $1.4 billion in emergency financing for Pakistan under the Rapid Financing Instrument (RFI) to help the country respond to the Covid-19 pandemic in April 2020. .

Experts say that, similar to the IMF’s April 2020 RFI, unconditional financial assistance appears to be the only option available to Pakistan, as other IMF financing instruments require prior actions or economic fundamentals, which which cannot be facilitated at this time.



(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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