In an encouraging move, the International Monetary Fund’s (IMF) Executive Board on Thursday approved a $700 million loan tranche for Pakistan.

The loan was released after the board completed its first review of Pakistan’s economic reform programme supported by a standby arrangement (SBA), the Ministry of Finance said in a post on X.

Under the $3 billion arrangement, Pakistan received $1.2 billion from the IMF as the first tranche — with the other two being subject to reviews. The first has been completed, while the other one will be in December.

The finance ministry added that the completion of the review allows for an immediate disbursement of around $700 million, bringing the total disbursements under the SBA to $1.9 billion.

Dr Khaqan Hasan Najeeb, a financial expert, told Thenews.com.pk that it was important for Pakistan to clear the first review as its external financing needs of $25 billion necessitate it stay with the IMF.

“$700 million from the IMF and flows of the multilaterals will prop up not only the state banks reserves but also give confidence to the markets,” Najeeb added.

Pakistan was nearing a default when the Pakistan Democratic Movement (PDM) was about to end its term last year. However, entering the SBA with the IMF helped the South Asian nation stave off the sovereign default.

The forex reserves held by the State Bank of Pakistan (SBP), as of January 5, stand at $8.1 billion, while the country’s total reserves have reached $13.2 billion after a debt of $66 million was repaid.

With the addition of the latest tranche, Pakistan’s forex reserves will reach a six-month-high — as on July 14, the SBP reserves were around $8.73 billion.

With the second review remaining, Najeeb said going forward, it’s extremely important that Pakistan completes all the targets, quantitative performance criteria, and indicative targets, as well as structural benchmarks due on December 31.

“The second review, which starts sometime in February, must also be completed for the final tranche,” he added.