In a significant development, Pakistan has reached an agreement with the International Monetary Fund (IMF) at the staff level on the first review of a $3 billion bailout.
Furthermore, following approval by the Executive Board of the Washington-based lender, the country will receive $700 million.
IMF and Pakistan Reached to a Staff Level Agreement
Following approval, Pakistan will have access to approximately $700 million, bringing total disbursements under the program to nearly $1.9 billion, according to an IMF statement issued on Wednesday.
Moreover, former Ministry of Finance adviser Dr. Khaqan Hassan Najeeb told a local news channel 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, adding that inflation should steadily decline “is the thought process moving forward”.
Moreover, Economist Maha Rehman told the local news channel that it was a “rather seamless staff level agreement”.
“The next one is likely to be handled by an elected government and I hope whoever comes in power realizes how urgent and important it is to adjust the lens with which we talk of policies and reforms,” said the Rehman.
However, she added that the adjustment needs to usher Pakistan “towards conversations of improved productivity.”
Agreement To Accelerate Commitments With IMF
According to the IMF, the agreement supports Pakistan’s commitment to advance planned fiscal consolidation and accelerate cost-cutting reforms in the energy sector.
The short-term agreement also calls for a complete return to a market-determined exchange rate, as well as the pursuit of state-owned enterprise and governance reforms to attract investment and support job creation while maintaining social assistance.
“Anchored by the stabilization policies under the SBA, a nascent recovery is underway, buoyed by international partners’ support and signs of improved confidence,” the statement added.
According to the global lender, the continued adjustment of energy prices, as well as renewed flows into the foreign exchange market, have reduced fiscal and external pressures.
Global Lender Views on Inflation
It also stated that inflation is expected to fall in the coming months due to easing supply constraints and low demand.
According to the IMF, Pakistan remains vulnerable to significant external risks such as increased geopolitical tensions, resurgent commodity prices, and further tightening of global financial conditions.
“Efforts to build resilience need to continue.”
In June of this year, Pakistan reached an agreement with the IMF for a $3 billion short-term loan.
Default Threat Averted
Averting the looming default threat, and implementing painful economic reforms such as raising electricity and gas tariffs in accordance with the Lender’s terms.
An IMF mission has been in Pakistan for the last two weeks for technical and policy discussions to determine whether the government is on track to meet the benchmarks set under the $3 billion standby agreement agreed in July.
From November 2 to 15, an IMF team led by Nathan Porter visited Islamabad and met with authorities to discuss the implementation of the SBA conditions.
“The IMF team thanks the Pakistani authorities, private sector, and development partners for fruitful discussions and cooperation throughout this mission.”
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