Islamabad: Pakistan has achieved a significant milestone in its economic recovery journey, successfully reaching a staff-level agreement with the International Monetary Fund (IMF) after the first review of its $3 billion bailout program. The IMF, in a press release, confirmed the staff-level agreement and mentioned that the Executive Board’s approval is pending for the disbursement of $700 million.
Upon approval, Pakistan is set to receive approximately $700 million, bringing the total disbursement under the program to nearly $1.9 billion. The agreement reflects Pakistan’s commitment to fiscal consolidation and energy sector reforms, aligning with the stipulations outlined by the IMF.
The short-term deal outlines a return to a market-determined exchange rate, alongside initiatives for state-owned enterprises and governance reforms aimed at attracting investment, supporting job creation, and reinforcing social assistance.
The IMF’s statement acknowledged the positive impact of stabilizing policies under the Stand-By Arrangement (SBA), noting a nascent economic recovery supported by international partners and improved confidence. The IMF credited the execution of the FY24 budget, ongoing adjustments to energy prices, and renewed flows into the foreign exchange market for mitigating fiscal and external pressures.
While projecting a decline in inflation over the coming months due to receding supply constraints and modest demand, the IMF also cautioned that Pakistan remains exposed to significant external risks, including geopolitical tensions, rising commodity prices, and potential tightening in global financial conditions. The statement emphasized the need for continued efforts to build resilience.
The $3 billion short-term loan agreement, secured by Pakistan in June, played a crucial role in averting a looming default threat. The agreement necessitated substantial economic reforms, including increases in electricity and gas tariffs in alignment with the IMF’s conditions.
Over the past two weeks, an IMF mission led by Nathan Porter conducted technical- and policy-level talks in Islamabad to assess the government’s progress in meeting the benchmarks outlined in the $3 billion standby arrangement agreed upon in July. The discussions primarily focused on the implementation of conditions set under the SBA.
