Pakistan and IMF Secure Preliminary Agreement on Initial Review of 9-Month Stand-By Arrangement
In a significant development, the International Monetary Fund (IMF) declared on Wednesday that its team, alongside Pakistani authorities, has achieved a staff-level agreement (SLA) concerning the first review of the $3 billion, nine-month Stand-By Arrangement (SBA).
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The financial agency stated in a press release, "The IMF team has reached a staff-level agreement (SLA) with the Pakistani authorities on the first review of their stabilization program supported by the IMF’s US$3 billion (SDR2,250 million) SBA."
The SLA is contingent upon approval by the IMF Executive Board.
It further mentioned,
"The agreement is subject to approval of the IMF’s Executive Board. Upon approval, around US$700 million (SDR 528 million) will become available, bringing total disbursements under the program to almost US$1.9 billion."
Nathan Porter, leading an IMF team during their visit to Islamabad from November 2-15, 2023, emphasized the positive impact of stabilizing policies under the SBA, contributing to a nascent economic recovery. He highlighted achievements such as the execution of the FY24 budget, adjustments in energy prices, and improved confidence with renewed flows into the foreign exchange market, reducing fiscal and external pressures.
Porter cautioned, however, that despite expected declines in inflation due to easing supply constraints and modest demand, Pakistan remains exposed to significant external risks, including geopolitical tensions, rising commodity prices, and global financial conditions tightening. He stressed the necessity of ongoing efforts to enhance resilience.
IMF Mission Chief Nathan Porter and IMF Resident Representative Esther Perez Tuiz briefed Caretaker Prime Minister Anwaar-ul-Haq Kakar on the negotiation status under the first review of the SBA. Porter commended the Government of Pakistan for meeting program targets, leading to positive outcomes in technical-level talks.
Earlier, Kristalina Georgieva, Managing Director of the IMF, expressed optimism about reaching an agreement on the SBA's first review "within this week." She acknowledged the Pakistani authorities and the Caretaker Finance Minister for adhering to the program during challenging times. Georgieva underscored the importance of addressing Pakistan's lower tax collection, considering it a pivotal issue, and urged authorities to aim for a tax-to-GDP ratio of at least 15% to sustain the country's functionality.
