IMF reaches staff-level agreement with Pakistan on final review of $3bn SBA | Maqvi News

ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have struck a staff-level agreement on second and final review under the Stand-By Arrangement paving the way for the release of the last $1.1 billion tranche from the lender. 

“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 US$3 billion (SDR2,250 million) SBA approved in January 2024 (Press Release No. 23/261). This agreement is subject to approval by the IMF’s Executive Board, upon which the remaining access under the SBA, US$1.1 billion (SDR 828 million), will become available,” said Nathan Porter, the head of the IMF team that held talks in Islamabad from March 14-19 on the second review.

The IMF mission chief noted that Pakistan’s “economic and financial position” was improving since the first review due to “prudent policy management and the resumption of inflows from multilateral and bilateral partners”.

But Porter warned that economic growth will remain “modest” in the ongoing financial year as inflation is still above target. He called for the implementation of ongoing policy and reform 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.

On the Shehbaz Sharif-led government, the IMF team stated that the new government is ready to follow the “policy efforts” that were launched in the SBA for the remainder of the year.

“In particular, the authorities are determined to deliver the FY24 general government primary balance target of PRs 401 billion (0.4 per cent 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,” said the IMF.

Porter also stated that Pakistan’s central bank is “committed to maintaining a prudent monetary policy to lower inflation and ensure exchange rate flexibility and transparency in the operations of the forex 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,” said the IMF.

More to follow…