Pakistan seeks US help in unlocking $1.1bn IMF loan

The country will honour its international commitments and is in the process of taking ‘very tough decisions’ such as increasing gas and electricity prices, Finance Minister Ishaq Dar says

A man withdraws money from an ATM machine along a street in Karachi, Pakistan Jan 26, 2023. REUTERS

Pakistan has sought support from Washington to unlock a stalled International Monetary Fund programme that would release $1.1 billion to its strained economy as the country rebuilds after last year's devastating floods, Dawn newspaper said on Thursday.

The IMF and Pakistan signed a $6 billion bailout in 2019, that was topped up with another $1.1 billion last year, but that came with conditions attached, aimed at reducing the budget deficit before the loan is released.

With interest rates already at 17%, inflation hitting 24.5% in December, and foreign reserves barely sufficient to cover three weeks of imports, the South Asian nation is in dire need of external financing.

Finance Minister Ishaq Dar met a visiting US Treasury delegation on Wednesday. He told them that Pakistan would honour its international commitments and was in the process of taking "very tough decisions" such as increasing natural gas and electricity prices, Dawn reported, citing sources.

"However, he pointed out, Pakistan required breathing space as the industry and agriculture had passed through most challenging times after the devastating floods," the report in the Pakistani English-language newspaper said.

The finance ministry did not immediately respond to a request for comment.

Last year's severe floods submerged swathes of the country, killed at least 1,700 people, and battered its already strained economy.

Rebuilding costs were estimated at $16.3 billion and international donors this month pledged to finance more than half of that.