The Executive Board of the International Monetary Fund (IMF) in Washington has approved an emergency release of $1.1 billion for Pakistan – the latest installment of its loan program.
Sources said the final installment was sanctioned by a standby agreement. Sources said $1.9 billion had been withdrawn under a $3 billion loan program.
According to a press release issued by the HPG, the Executive Board of the International Monetary Fund has finalized its second and final review of Pakistan’s economic reform program supported by the HPG Standard-Arrangement (SBA). The Council’s decision authorized the payment of SDR 828 million (about $1.1 billion) and the total payment under the agreement to SDR 2.250 billion (about $3 billion).
Approved by the Executive Council on July 12, 2023, the 9-month SBA in Pakistan provides policy support to address internal and external inequalities, as well as financial support from multilateral and bilateral partners.
The program focuses on necessary tax adjustments and debt sustainability through the implementation of the FY24 budget; protect important social costs; buffering external shocks and eliminating FX shortages by returning the FX market to its proper function; make progress in disinflation by adopting a tighter monetary policy; and the progress of structural reforms aimed at the sustainability of the energy sector, BUMN governance and climate resilience.
The macroeconomic situation has improved
Growth of 2 percent is expected in FY24, given the sustained recovery in the second half of the fiscal year. The fiscal position continues to strengthen with a core surplus of 1.8 percent. Gross domestic product in the first half of FY2024 was achieved in half, beating forecasts and pushing Pakistan to a core surplus of 0.4 percent of GDP, inflation is still rising and the fall of monetary policy is expected to reach about 20 percent by the end of June, about $8. billion, at the beginning of the program 4 5 billion and is expected to be rebuilt in the medium term.
After the Executive Board deliberations, Deputy Managing Director and President Antoinette Sayeh said, “Pakistan’s 2023 Standstill Arrangement (SBA) policy has made progress in restoring economic stability. Growth is flat again; external pressure is reducing; inflation is beginning to decline. Given the significant challenges ahead, Pakistan must take advantage of this instability with more resilient macroeconomic policies and structural reforms than the current plan to ensure stronger, more inclusive and sustainable growth.” Then external support will also be critical.”
Continued revenue mobilization efforts and spending discipline at the federal and provincial levels remain critical to achieving the primary surplus target. Beyond fiscal year 2024 , continued fiscal stability and additional land revenue for social spending and development depends on greater mobilization, especially from the unfiltered sector, and improved public financial management.”
“The authority has stabilized the revolving credit of the power sector during the SBA by making timely rate changes and strengthening collection efforts. Although this action should continue, it is important that the authority implement effective reforms to solve the main challenges and viability of the industry.
Further improvements in the functioning of the foreign exchange (FX) market, and market-based exchange rates, will help absorb external shocks and attract financing, thereby supporting competitiveness and The rebuilding of FX reserves in the SBA should continue. In addition, stronger measures to address overcapitalized financial institutions and financial sector vigilance are needed to ensure broader financial stability.
