ISLAMABAD:
The International Monetary Fund (IMF) announced on Wednesday a staff-level agreement for the release of the last loan tranche of $1.1 billion and said Pakistan’s economic and financial positions have improved.
However, the global lender cautioned that economic growth remained modest and inflation was above target. The IMF also said Pakistan will further increase gas and electricity prices to keep circular debt at the agreed level during the current fiscal year.
The monetary fund also announced that Pakistan has shown interest in taking a new medium-term bailout package and discussions will begin in the coming months.
An IMF team, led by Nathan Porter, visited Islamabad from March 14-19, 2024, to hold discussions on the second review of Pakistan’s economic program supported by an IMF Stand-By Arrangement (SBA), said the fund.
“The IMF team has reached a staff-level agreement with the Pakistani authorities on the second and final review of Pakistan’s stabilization program supported by the IMF’s $3 billion SBA, according to the IMF.
This agreement is subject to approval by the IMF’s Executive Board, upon which the remaining access under the SBA, $1.1 billion will become available, added the statement from the fund.
“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.”
The IMF further stated that ongoing policy and reform efforts are required to address Pakistan’s deep-seated economic vulnerabilities amidst the ongoing challenges posed by elevated external and domestic financing needs and an unsettled external environment.
“The new government is committed to continuing the policy efforts that started under the current SBA to entrench economic and financial stability for the remainder of this year. In particular, the authorities are determined to deliver the general government primary balance target of Rs401 billion (0.4 percent of GDP), with further 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 (CD) accumulation in FY24,” added the statement.
The State Bank of Pakistan remains committed to maintaining a prudent monetary policy to lower inflation and ensure exchange rate flexibility and transparency in the operations of the FX market.
The authorities also expressed interest in a successor medium-term fund-supported program with the aim of permanently resolving Pakistan’s fiscal and external sustainability weaknesses, strengthening its economic recovery, and laying the foundations for strong, sustainable, and inclusive growth.
