The International Monetary Fund (IMF) and Pakistan have reached a staff-level agreement regarding the final review under the nine-month $3 billion Stand-By Arrangement (SBA).
Announced on Wednesday, the agreement is contingent upon approval by the IMF’s Executive Board. Upon approval, the remaining access under the SBA, totaling $1.1 billion (SDR 828 million), will be disbursed to Pakistan.
In addition, Pakistani authorities have expressed interest in pursuing a successor medium-term Fund-supported program, as stated by the IMF.
The agreement acknowledges the robust implementation of the program by the State Bank of Pakistan (SBP) and the caretaker government, along with the new government’s commitment to ongoing policy and reform efforts aimed at transitioning Pakistan from stabilization to a sustainable recovery phase.
The IMF expects the review to be considered by its Board in late April, given the timing of the Second Review mission conducted immediately after the formation of the new cabinet.
Led by Nathan Porter, the IMF team conducted discussions in Islamabad from March 14-19, 2024, focusing on the second review of Pakistan’s economic program supported by an IMF SBA.
Porter, at the conclusion of discussions, highlighted that the IMF team had reached a staff-level agreement with Pakistani authorities on the final review of Pakistan’s stabilization program. This agreement, subject to Executive Board approval, would unlock the remaining access under the SBA.
While Pakistan’s economic and financial situation has shown improvement since the first review, growth remains modest, and inflation persists above target. The IMF emphasized the need for continued policy reforms to address Pakistan’s economic vulnerabilities amid elevated external and domestic financing needs and a challenging external environment.
The Pakistani government reaffirmed its commitment to maintaining economic and financial stability, including achieving the FY24 general government primary balance target and implementing power and gas tariff adjustments to prevent net circular debt accumulation.
Furthermore, discussions are anticipated to commence in the coming months regarding a successor medium-term Fund-supported program. Key objectives of this program would include strengthening public finances, restoring energy sector viability, managing inflation, and promoting private-led activity to foster resilient and inclusive growth.
The agreement with the IMF comes at a crucial time for Pakistan’s economy as it seeks to address its balance of payment crisis and embark on a path towards sustainable growth.
