The IMF program’s board approval continues to face delays. While the staff-level agreement was reached swiftly, with the IMF accommodating the government’s requests, the board’s approval has been far from straightforward. Initially, the finance minister expressed confidence that the board meeting would occur in August. When no meeting was scheduled, he optimistically shifted the timeline to the first half of September.

However, there are indications that Pakistan’s inclusion on the IMF board meeting agenda could be postponed until the end of September, with the possibility of further delays. The primary issue at hand is the unresolved gross financing gap. To date, the government has secured commitments totaling only $1.2 billion, leaving $3.8 billion pending. This includes an $800 million firm commitment for the first 12 months of the program and an additional $3 billion in soft commitments for FY26 and FY27.

This delay is causing unease across various sectors. Conversations among bank treasury desks suggest that foreign portfolio investors are reducing their exposure to government market-based debt, sensing potential delays that local markets have yet to reflect. The prolonged wait is casting doubt on the macroeconomic stability touted by the finance minister, raising concerns about the viability of economic growth.

The situation is further complicated by strained relations with China over the issue of Independent Power Producers (IPPs). During the finance minister’s recent visit to China, discussions on reprofiling IPPs’ debt stalled when Chinese officials questioned the government’s long-term plan if a five-year moratorium on principal debt repayment was granted. The finance team had no satisfactory answer, effectively stalling the talks. This has fueled discomfort among state actors regarding the government’s performance and its finance team’s strategy—or lack thereof. The Chinese appear unwilling to assume more risk without a clear, sustainable path forward.

As a result, the government is now turning to GCC countries for additional support. Saudi Arabia has pledged $1.2 billion in an oil facility, but this falls short of what is needed. The next target is securing financing from UAE-based commercial banks, which are insisting on IMF approval before they commit. However, the IMF is holding off until financial commitments are in place, creating a frustrating chicken-and-egg scenario. The steep rates demanded by commercial banks are adding to the already burdensome debt servicing costs, exacerbating the strain on the external sector.

This situation also raises doubts about the IMF’s assumption of $8 billion in private credit inflows for the current fiscal year and $15 billion in the following year. Given the unfolding scenario, these assumptions appear overly optimistic. Some fear that if the deadlock persists, the government and the State Bank of Pakistan (SBP) may revert to the restrictive import policies of 2023, prioritizing only essential imports.

The stakes are high, and the clock is ticking. Every delay not only erodes confidence but also threatens the fragile economic stability that Pakistan desperately needs.