WASHINGTON: The International Monetary Fund’s (IMF) Executive Board has greenlighted a 37-month $7 billion Extended Fund Facility (EFF) for Pakistan, with the incumbent government hoping that it would be the country’s last.

Sources told Geo News that the interest rate on the loan is less than 5%, adding that the IMF was expected to disburse the first tranche of $1.1 billion by September 30, 2024.

Confirming the development, State Bank of Pakistan (SBP) Governor Jameel Ahmed said that Islamabad would receive first tranche of $1.10 billion, adding, the country has fulfilled all demands of the global lender.

In July this year, Pakistan and the IMF reached an agreement on the 37-month loan programme.

The approval finally came following the confirmation of $12 billion in bilateral loans from Saudi Arabia, China and the UAE and the external financing of $2 billion.

According to insiders, Pakistan owes $5 billion to Saudi Arabia in the form of cash deposits. It must be noted that Pakistan also holds $4 billion in deposits from China and $3 billion from the UAE.

Pakistan was required to secure external financing of $2 billion from bilateral and commercial lenders as a pre-requisite for the IMF board’s approval.

Later, the global lender identified an external financing gap of $2 to $2.5 billion and confirmation was secured from the kingdom in the shape of a Saudi oil facility as well as an ITFC facility of $400 million from IsDB and remaining from Standard Chartered Bank and other Middle East-based commercial banks, as per The News report.

Meanwhile, Prime Minister Shehbaz Sharif has voiced its satisfaction over the development, reaffirming that the implementation of economic reforms was underway expeditiously.

In a statement issued from New York, the premier thanked the friendly countries particularly Saudi Arabia, China and the United Arab Emirates (UAE) for extending support regarding the bailout package.

He also thanked IMF Managing Director Kristalina Georgieva and her entire team.

PM Shehbaz said by the grace of Allah Almighty, process for implementation of economic reforms is vigorously underway. “We will continue hard work with the same spirit for achieving target of economic development after economic stability.”

He said surge in business activities and investment in Pakistan was a testimony of the hard work of economic team.

The cash-strapped country had to undertake a slew of measures demanded by the IMF, including broadening the tax next, enforcing tax on agricultural income, and increasing the electricity and natural gas prices.

Satisfying the IMF — which had repeatedly demanded improved tax collection, the federal government presented the tax-loaded Rs18.877 trillion budget for the fiscal year 2024-25 (FY25) in June.

The budget aimed at raising Rs13 trillion by next July, a roughly 40% increase from the current financial year, to bring down a ruinous debt burden that has caused 57% of government revenue to be swallowed by interest payments.

The tax rises mostly fall on salaried workers, who comprise a relatively small part of Pakistan’s mostly informal economy, as well as some retail and export businesses. The budget also threatened punitive measures for tax avoiders, including restrictions on mobile phones, gas and electricity access and the ability to fly abroad.

Reining in unresolved debt across Pakistan’s power sector was also a top concern of the global lender, which ended a $3-billion bailout in April that led to higher tariffs, hurting the poor and middle class, and cut household use for the first time in 16 years.  

Islamabad has relied heavily on IMF programmes for years, at times nearing the brink of sovereign default and having to turn to countries such as the United Arab Emirates and Saudi Arabia to provide it with financing to meet external financing targets set by the IMF.

This is a developing story and is being updated with more details.