Pakistan is making progress toward securing the International Monetary Fund’s (IMF) first economic review as part of its $3 billion loan program in November, which would pave the way for the disbursement of the second tranche of $700 million.
Despite facing challenges in meeting certain targets and implementing promised reforms, there is a high likelihood that Pakistan will receive the next IMF tranche.
The IMF’s Executive Board may grant a waiver if it deems the program to be viable, taking into account missed structural benchmarks and indicative targets within the overall program performance.
The State Bank of Pakistan (SBP) governor confirmed that all quantitative performance targets required by the IMF program related to the SBP have been met.
The finance ministry has also expressed its commitment to maintaining fiscal discipline and achieving primary balance targets. Pakistan secured a nine-month Stand-By Arrangement (SBA) from the IMF worth $3 billion in June 2023, exceeding expectations in terms of duration and size.
Under the $3 billion SBA, Pakistan received $1.2 billion in July 2023 and expects an additional $700 million upon the successful completion of the first review.
The government is exploring commercial loans worth $5 billion and another $0.7 billion from various sources, aiming for total projected foreign inflows of $26 billion for FY24.
Additionally, Saudi Arabia and the UAE deposited a combined $3 billion into SBP’s account in support of the IMF loan program in June, bolstering the nation’s foreign exchange reserves. However, reserves have declined due to the absence of additional foreign currency inflows from multilateral and bilateral financial institutions.
The policies under the new IMF program (SBA) aim to stabilize Pakistan’s economy and strengthen its financial resilience. Key policy elements include a suitable FY24 budget to support fiscal adjustments, a market-determined exchange rate, and a well-functioning foreign exchange market to address balance of payments pressures.
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