The International Monetary Fund (IMF) staff and the Pakistani authorities have reached a staff-level agreement on the first review under Pakistan’s Stand-By Arrangement (SBA), subject to approval by the IMF’s Executive Board. Upon approval, Pakistan will have access to SDR 528 million (around $700 million), the IMF said in a statement on November 15, 2023. “The IMF team has reached a staff-level agreement (SLA) with the Pakistani authorities on the first review of their stabilization program supported by the IMF’s US$3 billion (SDR 2,250 million) SBA. The agreement is subject to approval of the IMF’s Executive Board. Upon approval around US$700 million (SDR 528 million) will become available bringing total disbursements under the program to almost US$1.9 billion,” IMF said quoting Nathan Porter, who led the IMF team that visited Islamabad from November 2-15, to hold discussions on the first review.
In this regard, strengthening macroeconomic sustainability and laying the conditions for balanced growth are key priorities under the SBA. The authorities’ policy priorities include:
- Continued fiscal consolidation to reduce public debt, while protecting development needs. The authorities are determined to achieve a primary surplus of at least 0.4 percent of GDP in FY24, underpinned by federal and provincial government spending restraint and improved revenue performance supported, if necessary, by contingent measures.
- The authorities will continue the timely disbursements for social protection under BISP’s budget allocation— which are about a third higher than in FY23. This will allow for the expansion of the Unconditional Cash Transfers (UCT) Kafaalat program to 9.3 million families this fiscal year, with an annual inflation adjustment of the stipend.
- While protecting vulnerable consumers, the authorities implemented power tariff adjustments that were pending since July 2023 and increased gas prices after a long time, effective November 1, 2023.
- Returning to a market-determined exchange rate and rebuilding FX reserves
- Proactive monetary policy to lower inflation toward its target
- Building financial sector resilience. Continued vigilance is warranted to safeguard the soundness of the banking system. Priorities include addressing undercapitalized financial institutions, ensuring foreign exchange exposures within regulatory limits, and aligning bank resolution and crisis management frameworks with best practices.
- High governance and transparency standards will apply to the management of assets under the ownership of the newly created Sovereign Wealth Fund (SWF) and the operations of the SIFC.
- Deepening cooperation with international partners. The authorities have accelerated the engagement with multilateral and official bilateral partners. Timely disbursement of committed external support remains critical to support the authorities’ policy and reform effort
The IMF team thanked the Pakistani authorities, the private sector, and development partners for fruitful discussions and cooperation throughout this mission. https://tinyurl.com/mry8wc9r
Source: IBP