Pakistan: IMF loan smaller than needed but reassuring conditions, equities more attractive than US$ sovereign debt
On Sunday, the IMF announced that it had reached Staff-Level Agreement on a 39-month, US$6bn Extended Fund Facility (EFF). While the Staff-Level Agreement should be seen as a positive, and ends an 8-month back and forth between the Fund and the authorities, the program size that has been announced by the IMF is slightly smaller than both what the market was expecting as well as the country’s likely 3-year external financing gap, which we previously calculated to be cUS$12.5bn US$. It is important to note, however, that the press release specifically mentions that the current agreement remains contingent upon the “timely implementation of prior actions and confirmation of international partners’ financial commitments” – likely indicating additional bilateral support in coming months prior to the final approval by the Fund’s Executive Board, which should be expected within the next 6-8 weeks.
The press release from the IMF remains vague on the details of the program, which is to be expected at this point, as the program will still need to be approved at management level as well as by the Executive Board...
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