An International Monetary Fund (IMF) delegation is set to conduct a pivotal review in Pakistan, marking the final assessment of a critical $3 billion standby arrangement. Scheduled to commence this Thursday, the four-day evaluation comes at a crucial juncture for Pakistan, which last summer managed to secure this vital financial support to dodge a sovereign default threat.

The KSE-100 index suffered a significant loss as bearish tendencies persisted on the Pakistan Stock Exchange (PSX). At the closing of Wednesday’s trading session, the index had dropped 753.26 points, or 1.16%, to conclude at 64,048.44. Likewise, the Index’s KSE-100 (-953.60) points from the previous day.

The last evaluation of the Stand-By Arrangement (SBA) and the upcoming economic review by the International Monetary Fund (IMF) mission have clouded market sentiment. The review is scheduled to begin on March 14. The likelihood of strict IMF regulations and dwindling expectations for a rate drop have added to the gloomy forecast.

CRUCIAL BENCHMARKS MET

The Finance Ministry of Pakistan has confidently stated that all structural benchmarks, qualitative performance criteria, and indicative targets have been met, paving the way for a hopeful staff-level agreement post-review. This successful completion could unlock a significant tranche of approximately $1.1 billion.

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In anticipation of the standby arrangement’s expiration on April 11, Prime Minister Shehbaz Sharif, alongside his newly appointed Finance Minister Muhammad Aurangzeb, has initiated plans to negotiate an Extended Fund Facility (EFF) with the IMF. This move aims to secure a more sustainable financial footing for Pakistan beyond the immediate rescue package.

THE ROAD TO A MEDIUM-TERM PROGRAMME

While the specific details of the requested funding under a successor programme remain under wraps, the government’s eagerness to embark on discussions for an EFF during the current talks has been made clear. The finance minister expressed optimism about starting the negotiation process, highlighting the importance of these discussions for Pakistan’s economic future.

Finance Minister Muhammad Aurangzeb, chosen over several contenders including the seasoned Ishaq Dar, faces the daunting task of steering Pakistan away from its perennial economic challenges. With the nation grappling with a minor economic contraction last year and a modest growth projection of around 2% this year, the stakes are high. The economic landscape is further complicated by dwindling reserves, a balance of payment crisis, soaring inflation at 23%, a high policy interest rate of 22%, and unprecedented local currency depreciation.


 

Beyond only a financial evaluation, the IMF’s impending review of Pakistan is a significant step towards attaining economic stability and securing a path of sustainable growth. The world community keeps a watchful eye on the country as it satisfies the requirements of its current programme and looks to future financing sources. Even if Pakistan’s path to economic recovery is fraught with difficulties, it nevertheless serves as evidence of the leaders’ tenacity and strategic vision in the face of hardship.

INTEREST RATES AND ITS IMPACT ON ECONOMY AND THE STOCK MARKET

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