Pakistan and the International Monetary Fund (IMF) have achieved a breakthrough in their economic review discussions. Both parties have finalized a staff-level agreement regarding the second and final review within the stand-by arrangement, pending approval from the IMF’s Executive Board.
An announcement has disclosed that Pakistan is set to obtain the final installment of $1.1 billion as part of a $3 billion loan agreement next month, pending approval from the IMF Executive Board.
Upon receipt of the last tranche, the current standby arrangement of $3 billion will expire. Reports indicate that the IMF has commended Pakistan's economic endeavors.
According to a statement from the IMF team lead Nathan Porter, "Pakistan's economic and financial standing has strengthened in the months following the initial review, with growth and confidence showing signs of recovery due to prudent policy management and the resurgence of inflows from multilateral and bilateral partners."
However, the IMF forecasts that growth will remain modest this year, while inflation is expected to stay well above target. The statement emphasizes the necessity for ongoing policy and reform efforts to address Pakistan’s deep-seated economic vulnerabilities, especially in the face of elevated external and domestic financing needs and an uncertain external environment.
It further highlights that the caretaker government and the State Bank of Pakistan have diligently adhered to program implementation. Moreover, the new government has expressed its commitment to continuing current policies and reforms aimed at transitioning Pakistan from stabilization to a robust and sustainable recovery.
The IMF Mission, led by Nathan Porter, conducted its visit to Pakistan from March 14 to 19, with the Executive Board expected to review the outcomes in late April.
Additionally, the statement outlines the new government's pledge to convert economic stability into sustainable growth. Pakistan has indicated interest in entering into a new loan program, likely a "medium-term Fund-supported program," with the objective of permanently addressing fiscal and external sustainability weaknesses, bolstering economic recovery, and establishing the groundwork for robust, sustainable, and inclusive growth.
The statement underscored the Pakistani authorities' commitment to achieving the "FY24 general government primary balance target of Rs401 billion (0.4 percent of GDP), with additional measures aimed at expanding the tax base. They also pledged to continue implementing timely adjustments to power and gas tariffs to maintain average tariffs in line with cost recovery, while safeguarding vulnerable groups through existing progressive tariff structures.
Discussions on this new program between the two parties are slated to commence in the coming months, with the IMF acknowledging the improved economic and financial situation in Pakistan.
