Pakistan reaches staff-level agreement with the IMF

WEB DESK: Pakistan has successfully reached a staff-level agreement with the International Monetary Fund (IMF) following the first review of a $3 billion bailout.

“The IMF team has reached a staff-level agreement (SLA) with the Pakistani authorities on the first review of their stabilisation program supported by the IMF’s US$3 billion (SDR2,250 million) SBA,” the international lender said in its press release.

The approval from the lender’s Executive Board is awaited for the disbursement of $700 million.

Upon approval, Pakistan stands to gain access to approximately $700 million, marking a total disbursement of nearly $1.9 billion under the programme, as stated by the IMF in a release on Wednesday.

The IMF highlighted that the agreement aligns with the Pakistani authorities’ commitment to advancing planned fiscal consolidation and expediting cost-reducing reforms in the energy sector.

The short-term deal also outlines a return to a market-determined exchange rate, along with initiatives for state-owned enterprises and governance reforms aimed at attracting investment, supporting job creation, and reinforcing social assistance.

The statement from the IMF indicated, “Anchored by the stabilisation policies under the SBA, a nascent recovery is underway, buoyed by international partners’ support and signs of improved confidence.”

It credited the steadfast execution of the FY24 budget, ongoing adjustments to energy prices, and renewed flows into the foreign exchange market for mitigating fiscal and external pressures.

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The IMF projected a decline in inflation over the coming months, attributing it to receding supply constraints and modest demand.

However, the IMF cautioned that Pakistan remains exposed to significant external risks, including geopolitical tensions, rising commodity prices, and potential tightening in global financial conditions. It emphasised the need for continued efforts to build resilience.

The $3 billion short-term loan agreement with the IMF was secured by Pakistan in June, averting a looming default threat.

The agreement necessitated substantial economic reforms, including increases in electricity and gas tariffs in alignment with the lender’s conditions.

Over the past two weeks, an IMF mission, led by Nathan Porter, conducted technical- and policy-level talks in Islamabad to assess the government’s progress in meeting benchmarks outlined in the $3 billion standby arrangement agreed upon in July.

The discussions focused on the implementation of conditions set under the SBA.