IMF has released its Country Report on Pakistan after the Executive Board approved a 9-month Stand-By Arrangement (SBA) of US$3bn for Pakistan. Of this amount, US$1.2bn has already been disbursed, with the rest subject to two quarterly reviews scheduled for Nov-2023 and Feb-2024.
According to the IMF country report, Pakistan’s economic challenges are complex and multifaceted, and risks are exceptionally high. Addressing them requires steadfast implementation of agreed policies, as well as continued financial support from external partners. Consistent and decisive implementation of program agreements will be essential to reduce risks and maintain macroeconomic stability.
As per the IMF country report, Pakistan has recently taken major steps including the completion of prior actions. The prior action includes (1) parliamentary approval of a FY24 budget in line with IMF staff agreement to meet program targets, and (2) withdrawal of the circular on prioritization in providing FX for certain types of imports introduced in Dec-2022, with the purpose of ensuring full market determination of the exchange rate.
The SBA will focus on (1) implementation of the FY24 budget to facilitate Pakistan’s needed fiscal adjustment and ensure debt sustainability, (2) return to a market-determined exchange rate and proper FX market functioning to absorb external shocks and eliminate FX shortages, (3) an appropriately tight monetary policy aimed at disinflation, and (4) further progress on structural reforms, particularly with regard to energy sector viability, SOE governance, and climate resilience.
IMF has set 9 Performance Criteria, 4 Indicative Targets, 10 Structural Benchmarks. If a country misses a Performance Criteria condition, the IMF Executive Board may approve a waiver if it is satisfied that the program will still succeed. Missed structural benchmarks and indicative targets do not require waivers but are assessed in the context of overall program performance.