The talks on an economic review between Pakistan and the International Monetary Fund (IMF) have been successful. The two sides have reached a staff-level agreement on the second and final review under the stand-by arrangement, subject to the approval of the IMF’s Executive Board.
In an announcement, it was revealed that Pakistan will receive the last installment of $1.1 billion under a $3 billion loan agreement next month, following the approval of the IMF Executive Board.
As soon as the country receives the last tranche, the current standby arrangement of $3 billion will expire. It has been reported that the IMF has lauded Pakistan's economic initiatives.
“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," as per the statement issued by the IMF team lead Nathan Porter.
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It, however, forecasts growth to remain modest this year, adding that inflation remained well above target. "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 statement added.
It further said that the caretaker government and the State Bank of Pakistan strictly followed the program implementation, according to a statement issued at the conclusion of the talks. It further says that the new government has also expressed its determination to continue the ongoing policies and reforms to move Pakistan from stabilization to a strong and sustainable recovery.
The IMF Mission, headed by Nathan Porter, visited Pakistan from March 14 to 19, the statement said, adding that the Executive Board is expected to consider the review in late April.
The statement further said that the new government has vowed to transform economic stability into sustainable growth, adding that Pakistan has shown interest in entering into a new loan program, which is likely to be a "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".
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The statement mentioned that the Pakistani authorities were determined to deliver the "FY24 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".
The discussions on this new programme between the two parties are expected to begin in the coming months, the IMF said, commending the economic and financial situation of Pakistan that it said had improved.
Further, the statement added, the IMF expected some key objectives to be fulfilled, which are:
- Strengthening public finances, including through gradual fiscal consolidation and broadening the tax base (especially in undertaxed sectors) and improving tax administration to improve debt sustainability and create space for higher priority development and social assistance spending to protect the vulnerable.
- Restoring the energy sector’s viability by accelerating cost reducing reforms, including through improving electricity transmission and distribution, moving captive power demand to the electricity grid, strengthening distribution company governance and management, and undertaking effective anti-theft efforts.
- Returning inflation to target, with a deeper and more transparent flexible foreign exchange market supporting external rebalancing and the rebuilding of foreign reserves.
- Promoting private-led activity through the above-mentioned actions as well as the removal of distortionary protection, advancement of SOE reforms to improve the sector’s performance, and the scaling-up of investment in human capital, to make growth more resilient and inclusive and enable Pakistan to reach its economic potential.
