In a significant move towards stabilizing Pakistan’s economy, the International Monetary Fund (IMF) has granted a staff-level agreement for the first review of a $3 billion bailout. This comes after the IMF’s technical staff conducted the initial evaluation, leading to positive discussions in Islamabad.
Nathan Porter, leading the IMF team, confirmed the agreement, stating that upon Executive Board approval, $700 million would be disbursed, bringing the total under the program to nearly $1.9 billion.
The agreement reflects Pakistan’s commitment to fiscal consolidation, energy sector reforms, and a market-determined exchange rate. Porter expressed optimism, noting a nascent economic recovery bolstered by international support and improved confidence. However, he cautioned about external risks and emphasized the need for ongoing efforts to build resilience.
The IMF’s statement praised Pakistan’s execution of the FY24 budget, adjustments in energy prices, and improved foreign exchange market flows, easing fiscal and external pressures.
Inflation is expected to decline, but challenges persist, including geopolitical tensions and global financial conditions. The IMF stressed the importance of continued efforts to strengthen macroeconomic sustainability and promote balanced growth under the Stand-By Arrangement (SBA).
The fiscal consolidation plan includes reducing public debt, achieving a primary surplus, and enhancing revenue mobilization. The authorities aim to expand the tax base, improve public investment quality, and ensure timely disbursements for social protection. The statement highlighted ongoing reforms in the energy sector to address circular debt and restore viability, emphasizing the necessity of immediate action.
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IMF Managing Director Kristalina Georgieva praised Pakistan’s commitment to the economic program, with expectations for the release of the second tranche this week. While acknowledging challenges, including tax collection, Georgieva commended the finance minister’s efforts during a challenging period.
Simultaneously, interim Prime Minister Anwaarul Haq Kakar, in a meeting with IMF representatives, reaffirmed the government’s enduring commitment to IMF-agreed reforms. The meeting acknowledged the positive conclusion of technical-level talks and the crucial role played by the finance minister and the State Bank of Pakistan governor.
In the face of recent scrutiny over fund pledges, Pakistan’s collaboration with the IMF reflects a crucial phase in its economic stabilization efforts. The approval of the first review signifies not only financial support but also international confidence in Pakistan’s commitment to reform and resilience-building measures.