ISLAMABAD: The International Monetary Fund (IMF) and Pakistani authorities on Wednesday reached a staff-level agreement on the first review of Pakistan’s economic program supported by a Stand-By Arrangement (SBA). Pending approval by the IMF’s Executive Board, this breakthrough will grant Pakistan access to SDR 528 million (around US$700 million).
Nathan Porter, leading the IMF team during the November 2 to 15 visit to Islamabad, highlighted the important aspects of the agreement. The accord aligns with Pakistan’s commitment to advance fiscal consolidation, implement energy sector reforms, transition to a market-determined exchange rate, and undertake governance reforms in state-owned enterprises to attract investment and stimulate job creation. Meanwhile, social assistance programs will be reinforced.
In a statement the global lender said, “Anchored by stabilization policies under the SBA, Pakistan is witnessing a nascent economic recovery, boosted by international support and increased confidence. The execution of the FY24 budget, adjustments in energy prices, and improved foreign exchange market dynamics have mitigated fiscal and external pressures. While inflation is anticipated to decline in the coming months, the country remains exposed to external risks, including geopolitical tensions and commodity price fluctuations. Efforts to build resilience need to continue.”
Key priorities under the SBA include sustained fiscal consolidation, protection of development needs, social safety net reinforcement, energy sector cost reduction, market-driven exchange rate policies, and rebuilding foreign exchange reserves. The authorities aim for a primary surplus of at least 0.4 percent of GDP in FY24 and are committed to enhancing revenue mobilization and public investment quality.
The agreement stressed the expansion and improvement of social safety nets, including the Unconditional Cash Transfers (UCT) Kafaalat program. The authorities plan to increase UCT Kafaalat’s generosity level and enhance enrollment in Conditional Cash Transfers programs supporting children’s education and health.
Additionally, efforts to reduce costs in the energy sector are crucial. Addressing the circular debt, the authorities have implemented tariff adjustments and gas price increases to maintain sector viability while safeguarding vulnerable consumers. The return to a market-determined exchange rate and the rebuilding of foreign exchange reserves are crucial to sustainably alleviate external pressures.
Proactive monetary policy aims to lower inflation toward its target, while financial sector resilience and state-owned enterprise and governance reforms are integral to improving the business environment and fostering job creation. The engagement with international partners has intensified, with the timely disbursement of committed external support deemed critical for supporting Pakistan’s policy and reform initiatives.
IMF Officials Call on Pakistan’s Prime Minister
The IMF Mission Chief for Pakistan Mr Nathan Porter and IMF Resident Representative for Pakistan Ms Esther Perez Tuiz called on the Caretaker Prime Minister Anwaar-ul-Haq Kakar today and apprised him of status of the negotiations held at the technical levels with the team of… pic.twitter.com/8isor3toBx
— Prime Minister's Office (@PakPMO) November 15, 2023
Separately, IMF Resident Representative for Pakistan Esther Perez Tuiz and IMF Mission Chief for Pakistan Nathan Porter held a meeting with Pakistan’s caretaker Prime Minister Anwaar-ul-Haq Kakar and apprised him of the status of the talks held at the technical levels under the first review of the SBA.
During the meeting, Porter acknowledged the efforts made by Pakistan’s government in meeting the several quarterly targets.
Porter said that the efforts had resulted in the “positive conclusion of the technical-level negotiations”. He said that both teams had detailed talks on several aspects of the SBA.