Factbox: Why Pakistan's long-awaited IMF tranche is important

Pakistani Prime Minister Shehbaz Sharif said yesterday that he hoped a bailout decision from the International Monetary Fund (IMF) would come in a day or two, capping off protracted negotiations as the country faces an acute balance-of-payments crisis.

Islamabad is racing against time to unlock US$1.1 billion (RM5.13 billion) under the lender's ninth review of a US$6.5 billion (RM30.3 billion) Extended Fund Facility agreed upon in 2019. The programme expires on June 30.

Here are some facts about the importance of unlocking the funds for the cash-strapped South Asian country of 230 million people and the challenges it has faced:

Delayed tranche

- Pakistan has cleared eight of the 11 listed programme reviews, with the ninth review pending since November last year. The delay is already the longest since at least 2008.

- The ninth review is to release a tranche of US$1.1 billion, leaving about US$1.4 billion (RM6.5 billion) on the table in unlocked funds. It is unclear if an IMF agreement would release the entire amount.

- The ninth review had been stalled due to differences between the fund and Islamabad over policy actions, including external financing needs and a budget that meets programme goals.

Hole in finances

- The government has earmarked US$2.5 billion (RM11.6 billion) in external receipts from the IMF in its federal budget for next year, which means the government is budgeting for the 10th and 11th reviews too, or a new IMF programme after the current one expires.

- Pakistan needs upwards of US$22 billion (RM102 billion) to service external debt, make interest payments and finance its current account for next year. Reserves, at US$3.5 billion (RM16.3 billion), are at a critical level, enough to cover barely one month of controlled imports.

- Pakistan's credit rating has suffered due to macroeconomic uncertainty: Three key rating agencies recently cut Pakistan's ratings - Standard & Poor's rating for Pakistan stands at CCC+, Moody's at Caa3 and Fitch at CCC-.

Secondary benefits

- A successful review would not only release much-needed funds, but also unlock credit from other financiers who are looking for a clean bill of health from the IMF for the ailing US$350 billion (RM1.6 trillion) economy. This includes raising money from the private market.

- The country has received financing commitments from friendly countries Saudi Arabia and the United Arab Emirates of US$3 billion (RM13.9 billion), while China has granted rollovers on its debt payments due.

- National elections are due by November this year and the government has said the decision to enter a new IMF programme will be a decision for the incoming administration.

Tough conditions

- The initial draft of the budget presented in parliament earlier this month failed to meet IMF expectations but was hurriedly revised to introduce new taxes and expenditure cuts.

- The country's central bank also hiked the key rate by 100 basis points in an emergency meeting on Monday barely two weeks after keeping the rate unchanged in a scheduled meeting.

- Hopes of a last-minute bailout rose following meetings between Sharif and IMF managing director Kristalina Georgieva in Paris this month, followed by marathon meetings between IMF staff and finance ministry officials.

- Reuters