ISLAMABAD: Pakistan reached a staff-level agreement with the International Monetary Fund (IMF) on the first review of a $3 billion Standby Agreement (SBA), wherein the country will receive $700 million after approval from the lender’s Executive Board.
Upon approval, Pakistan will have access to around $700 million, bringing total disbursements under the programme to almost $1.9 billion, the IMF announced in a statement on Wednesday.
Ministry of Finance’s former adviser Dr Khaqan Hassan Najeeb told the media that the board’s approval will help Pakistan unlock more funding from other multilateral and bilateral donors.
“That is a good development and a satisfying one for Pakistan indeed,” he said, noting that inflation should steadily decline “is the thought process moving forward”.
The IMF said the agreement supports the Pakistani authorities’ commitment to advance the planned fiscal consolidation and accelerate cost-reducing reforms in the energy sector.
The short-term deal also envisages a complete return to a market-determined exchange rate, and pursues state-owned enterprise and governance reforms to attract investment and support job creation while continuing to strengthen social assistance.
“Anchored by the stabilisation policies under the SBA, a nascent recovery is underway, buoyed by international partners’ support and signs of improved confidence,” the statement added.
The Washington-based lender said steadfast execution of the FY24 budget, continued adjustment of energy prices, and renewed flows into the foreign exchange market have lessened fiscal and external pressures.
It further said inflation is expected to decline over the coming months amid receding supply constraints and modest demand.
However, Pakistan remains susceptible to significant external risks, including the intensification of geopolitical tensions, resurgent commodity prices, and the further tightening in global financial conditions, as per the IMF.
“Efforts to build resilience need to continue.”
Pakistan clinched the deal with the IMF for the $3 billion short-term loan agreement in June this year, averting the looming default threat, and undertook painful economic reforms including hiking electricity and gas tariffs in line with the lender’s conditions.
An IMF mission has been in Pakistan for the last two weeks for technical- and policy-level talks to review whether the government was on track to meet benchmarks set under the $3 billion standby arrangement agreed in July.
The IMF team led by Nathan Porter visited Islamabad from November 2-15, and held discussions with the authorities on the implementation of the SBA conditions.
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