March 20, 2024
ISLAMABAD – The International Monetary Fund (IMF) has reached a staff-level agreement with Pakistan on the final review of a $3 billion bailout, where the country will receive $1.1 billion after approval from the Fund’s Executive Board, the lender said on Wednesday.
“The agreement recognises the strong program implementation by the State Bank of Pakistan and the caretaker government in recent months, as well as the new government’s intentions for ongoing policy and reform efforts to move Pakistan from stabilisation to a strong and sustainable recovery.
“Given the timing of the Second Review mission, immediately following the formation of the new cabinet, we expect the review to be considered by the IMF’s Board in late April,” the Fund said in a statement on its website.
Nathan Porter, the IMF mission chief in Pakistan, issued the following statement, “Pakistan’s economic and financial position has improved in the months since the first review, with growth and confidence continuing to recover on the back of prudent policy management and the resumption of inflows from multilateral and bilateral partners.”
However, he added that growth was “expected to be modest this year” and that inflation remained well above target.
“Ongoing policy and reform efforts are required to address Pakistan’s deep-seated economic vulnerabilities,” he said, adding that new government “is committed to continue policy efforts”.
The statement added that the current government will continue its “efforts towards broadening the tax base, and continue with the timely implementation of power and gas tariff adjustments to keep average tariffs consistent with cost recovery while protecting the vulnerable through the existing progressive tariff structures, thus avoiding any net circular debt accumulation”.
Moreover, the statement said that the central bank remained “committed to maintaining a prudent monetary policy to lower inflation and ensure exchange rate flexibility”.
Following the statement, shares at the Pakistan Stock Exchange (PSX) climbed up by 374 points.
A day earlier, Finance Minister Muhammad Aurangzeb and the IMF mission chief in Pakistan, Nathan Porter, led their respective teams at the final customary concluding session, sources told Dawn. Both sides remained tight-lipped because of IMF communication protocols.
Last year, the IMF Executive Board had approved the nine-month arrangement with Pakistan “to support its economic stabilisation programme”. The approval had allowed for an immediate disbursement of $1.2bn, with the rest to be phased over the programme’s duration — subject to two quarterly reviews.
In November 2023, a Staff-Level Agreement (SLA) was reached between the IMF staff and the country regarding the first review under Pakistan’s SBA. This agreement was contingent upon approval by the IMF’s Executive Board.
In January, the IMF released the much awaited $700 million tranche, shoring up the State Bank of Pakistan’s (SBP) foreign reserves following a successful first review by the Executive Board of the IMF under the agreement.
The country now eyes a “longer and larger” economic bailout package with the IMF, as indicated by the newly elected Finance Minister Aurangzeb Khan in his first formal media interaction.
Meanwhile, a spokesperson for the lender also confirmed that the IMF supported formulating a new economic programme for the country if the new government sought one.
Subsequently, the primary ministerial meetings are scheduled from April 17 to 19, accompanied by additional events and activities throughout the week from April 15 to 20. Pakistan has communicated its intention to attend the meetings, with the new finance minister slated to lead the delegation.