Image Credit: Johannes P Christo/Reuters
Islamabad: The International Monetary Fund (IMF) has reached a Staff-Level Agreement (SLA) with Pakistan on the final bailout payment of $3 billion, where the country will receive the remaining $1.1 billion following approval from the Executive Board of Funds.
In a press release, the IMF stated that it “has reached a staff-level agreement with the Pakistani authorities on the second and final review of Pakistan’s stabilisation programme.”
The global lender announced the deal on Wednesday after the end of week-long negotiations with the Pakistani authorities in Islamabad focused on reviewing the nine-month stand-by arrangement (SBA) that was made last year in July to avert the nation’s debt default.
“The agreement recognizes the strong program implementation by the State Bank of Pakistan and the caretaker government in recent months, as well as the new government’s intentions for ongoing policy and reform efforts to move Pakistan from stabilization to a strong and sustainable recovery,” as IMF stated in a press release. “Given the timing of the Second Review mission, immediately following the formation of the new cabinet, we expect the review to be considered by the IMF’s Board in late April,” further added.
The IMF mission chief in Pakistan, Nathan Porter, encouraged the country’s economic improvement and said that the economic and financial position of Pakistan has been elevated as the growth and confidence steadily rising, bolstered by prudent policy management and the renewed contributions from bilateral and multilateral collaborators since the first review. He said, however, the country’s economic growth will be moderate and inflation rates will surpass the target this year.
“Ongoing policy and reform efforts are required to address Pakistan’s deep-seated economic vulnerabilities amidst the ongoing challenges posed by elevated external and domestic financing needs and an unsettled external environment,” he further added in the statement.
The lender urged the current government to remain committed to its efforts towards expanding the taxpayer pools alongside timely implementing the power and gas tariff adjustments to get a consistent cost recovery to safeguard the vulnerable segments through existing progressive tariff structures, consequently, it will help in preventing any net circular debt accumulation.
Pakistan is also seeking another long-term economic bailout, as newly elected Finance Minister Aurangzeb Khan implied in his first formal media briefing. The IMF also confirmed that the Pakistani officials expressed their interest in a successor medium-term Fund-supported program aimed at permanently rectifying the country’s fiscal and external challenges, boosting economic recovery, and establishing the basis for strong, sustainable, and inclusive growth.
Last year, the IMF and Pakistan agreed on the nine-month arrangement for the country’s economic stabilization programme that allowed an immediate disbursement of $1.2bn, with the rest to be phased over the programme’s duration — subject to two quarterly reviews, as Dawn reported. Following an SLA between the IMF and the officials in November 2023, Pakistan finally got the much-awaited $700 million tranche, shoring up the State Bank of Pakistan’s (SBP) foreign reserves following a successful first review by the Executive Board of the IMF under the agreement.
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