Pakistan borrowed from the International Monetary Fund (IMF) at a high interest rate of 5.09% in 2023 under the Stand-By Arrangement (SBA).
This was informed by representatives of the Ministry of Finance and the State Bank of Pakistan (SBP) to the Senate Standing Committee on Economic Affairs while briefing on details on Pakistan’s financial engagements with the IMF since 1958.
The SBP representative explained that the recent IMF loan carried an average interest rate of 5.1%, making it an expensive option. He noted that future IMF loans are expected to have similar rates unless global interest rates decline.
The IMF’s interest rate is determined by the Special Drawing Rights (SDR) basket price, plus a 1% base rate, with additional surcharges based on the loan volume and duration.
The SBP officials further clarified that if a country borrows more than 187.5% of its IMF quota, a 2% surcharge applies, along with an additional 1% surcharge for borrowing periods exceeding three years.
Historically, lending from the World Bank, the Asian Development Bank, and the IMF was considered affordable. However, due to Pakistan’s increasing borrowing needs and limited capacity to sustain such debt, interest rates from these institutions have also risen.
The finance ministry shared data indicating that Pakistan’s interest costs on IMF loans have steadily increased since 2008. In that year, Pakistan borrowed at an interest rate of 1.6%, which rose to 2.4% by 2013. The 2019 IMF program was secured at an average interest rate of 3.41%.
Maryum Kayani, Joint Secretary at the Ministry of Finance responsible for IMF affairs, informed the committee that since 1958, Pakistan has entered into 24 IMF programs and four special one-time facilities. Out of these 28 agreements, loans worth 28.3 billion SDRs (approximately $40.5 billion) were signed, with Pakistan receiving 21.3 billion SDRs (about $28.6 billion), while the remaining amounts were undisbursed.
Contrary to the belief that Pakistan has only completed two of its 24 IMF programs, the finance ministry clarified that the country has actually completed nine programs, including those from 1965-66, 1968-69, 1973-74, 1974-75, 1977-78, 1988-90, 2000-01, 2013-16, and 2023-24.
