IMF reaches Staff Level Agreement with Pakistan to disburse $1.1B

The International Monetary Fund (IMF) announced on Wednesday that it has reached a staff-level agreement with Pakistan, paving the way for the disbursement of $1.1 billion to the South Asian economy.

This agreement, pending approval by the IMF's board, comes at a critical time for Pakistan, which has been grappling with a balance of payment crisis and mounting debt. "This agreement is subject to approval by the IMF's Executive Board," stated the IMF in a release.

The deal, reached after five days of discussions between IMF officials and Pakistani authorities, is the final tranche of a $3 billion rescue package secured by Pakistan last summer, which helped prevent a sovereign debt default.

"Pakistan's economic and financial position has improved in the months since the first review, with growth and confidence continuing to recover on the back of prudent policy management and the resumption of inflows from multilateral and bilateral partners," remarked the IMF regarding the progress made by Pakistan.

However, challenges remain, with growth expected to be modest this year and inflation still exceeding targets. The IMF emphasized the need for further policy reforms to address Pakistan's economic vulnerabilities.

Pakistan eyes potential $6B loan request

Prime Minister Shehbaz Sharif emphasized the necessity of a new IMF loan during discussions with his ministers, highlighting the importance of expanding the tax base to secure such a deal.

While the government has not officially disclosed the size of the additional funding being sought, reports suggest Pakistan may request a loan of at least $6 billion.

Ahead of this agreement, Pakistan had to meet stringent IMF conditions, including budget revisions, interest rate hikes, and revenue generation through increased taxes and utility prices. The IMF underscored the government's commitment to these measures, urging for the broadening of the tax base and adjustments to power and gas tariffs.

Economist Sakib Sheerani noted that while the successful completion of the Stand-By Arrangement (SBA) improves Pakistan's chances of securing a follow-up program, the next arrangement is expected to entail deeper structural conditions, such as reforms in the public sector wage and pension bill.

With Pakistan expressing interest in another bailout, discussions on a medium-term program are anticipated to commence in the coming months, signifying ongoing collaboration between Pakistan and the IMF in addressing the country's economic challenges.

Source: Newsroom