The International Monetary Fund (IMF) staff and Pakistani authorities have successfully concluded discussions on the second and final review under Pakistan’s Stand-By Arrangement (SBA), pending approval from the IMF’s Executive Board. This agreement entails providing Pakistan access to SDR 828 million, approximately $1.1 billion, which will significantly contribute to bolstering the country’s foreign exchange reserves. Currently, Pakistan’s FX reserves stand at $7.91 billion.

RECOGNIZING PROGRESS AND COMMITMENTS

The agreement acknowledges the commendable program implementation by the State Bank of Pakistan and the caretaker government in recent months. Furthermore, it acknowledges the new government’s commitment to ongoing policy and reform efforts aimed at transitioning Pakistan from stabilization to a robust and sustainable recovery phase.

The IMF’s review mission, led by Nathan Porter, held discussions in Islamabad from March 14-19, 2024, focusing on Pakistan’s economic program supported by the SBA. The agreement reached between the IMF team and Pakistani authorities is contingent upon approval by the IMF’s Executive Board, following which the remaining access under the SBA will become available.

KEY OBJECTIVES AND POLICY PRIORITIES

Pakistan’s economic and financial standing has seen improvement since the first review, with growth and confidence on the rise due to prudent policy management and renewed inflows from multilateral and bilateral partners. However, challenges persist, including modest growth projections for the current year and inflation levels above target.

To address these challenges, ongoing policy and reform efforts are deemed necessary. The new government is committed to maintaining economic and financial stability, with specific targets set for the general government primary balance and measures to broaden the tax base while protecting vulnerable sectors.

The State Bank of Pakistan will continue to pursue prudent monetary policy to lower inflation and ensure exchange rate flexibility. Additionally, the authorities have expressed interest in a successor medium-term Fund-supported program to address fiscal and external sustainability weaknesses and promote inclusive growth.

Key objectives of this potential successor program include strengthening public finances, restoring the energy sector’s viability, controlling inflation, promoting private-led activity, advancing state-owned enterprise reforms, and increasing investment in human capital.

SUSTAINABLE GROWTH

Overall, the agreement between the IMF staff and Pakistani authorities reflects a commitment to address Pakistan’s economic challenges through concerted policy efforts and structural reforms, with the aim of fostering sustainable and inclusive growth.

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