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What is importance of IMF deal for Pakistan, who thinks what

ISLAMABAD (Eshfak Mughal):- A much awaited Stand-By Arrangement Program has been signed initially between Pakistani authorities and the International Monetary Fund (IMF) today to avert the risk of default of the country.

On Friday morning, Nathan Porter, IMF official issued a statement and said.“I am pleased to announce that the IMF team has reached a staff-level agreement with the Pakistani authorities on a nine-month Stand-by Arrangement (SBA) in the amount of SDR2,250 million (about $3 billion or 111 percent of Pakistan’s IMF quota)”.

It said that the agreement would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead.

While Commenting on the development, the former Federal Minister in PTI regime, Hammad Azhar said “the IMF program was delayed by almost a year. It caused immense economic damage. The last tranche of this extended IMF facility should be seen as nothing more than a breather for a few weeks. A new program has to be negotiated & entered into ASAP”.

He said that the In the meanwhile, before the PDM propaganda team paints this as a solution to all problems, it needs to be clear that Pakistan’s economy continues to be in a deep pit.

“I do not see a reversal of economic contraction with just one tranche or any easing off of inflationary pressures. Reforms are needed along with a new IMF program”, he twitted.

Michael Kugelman, the director of the South Asia Institute at the Wilson Center, said the deal would bring short-term stability to the country’s economy.

Kugleman told private tv channel o Friday that a deal would avert a likely default, unlock additional funding from key creditors, and improve investor confidence in the country’s economy to some extent.

The comments came as Pakistan reached the SLA on a $3 billion “stand-by arrangement (SBA)” with the global lender.

Kugleman, while highlighting fundamental economic issues, said that IMF agreement will restore the short-term stability. “But with the economy still burdened by so many entrenched structural flaws, there would be a level of vulnerability that makes it difficult to bring a full recovery,” he added.

Speaking about Finance Minister Ishaq Dar’s claims that geopolitics was the reason behind inordinate delay in the IMF agreement, the expert said: “A deal has given the lie to the notion that geopolitics was delaying an agreement.” 

“Once Islamabad finally took the fiscal policy steps to meet IMF conditions, negotiations picked up in a hurry and produced a deal,” he maintained. 

Last week, in a last-ditch effort to clinch a stalled rescue package with the IMF, the government introduced a number of changes to its budget for the fiscal year 2024 including hiking policy rates to 22% in its desperation to clinch the deal.

Finance Minister Ishaq Dar had announced on the floor of the National Assembly that for the fiscal year starting next month, the government will raise a further Rs215 billion in new tax and cut Rs85 billion in spending, as well as a number of other measures to shrink the fiscal deficit.

The IMF deal comes after an eight-month delay and offers some respite to Pakistan, which is battling an acute balance of payments crisis and falling foreign exchange reserves.

Business Community hails ‘IMF deal’

The $3 billion funding, spread over nine months, is higher than expected for Pakistan. The country was awaiting the release of the remaining $2.5 billion from a $6.5 billion bailout package agreed in 2019, which expires on Friday.

While commenting on the deal, renowned businessman Amin Hashwani said that the risk of default has averted and credit should be given to the Prime Minister for averting the risk of default, Pakistan was close to default and could default in the next three to six months.

He said that we should also see how we reached this situation. We put our theories and then it gets messed up, the current government will follow its political priorities and then it gets messed up, the deal with the IMF has been done but there has been a lot of damage in 8 months.

Amin Hashwani said that Pakistan has learned that the nation should not be too cautious and bring new theories, the IMF has a clear formula which it follows, the problem is not the IMF, it is ours, the government is taking money from the IMF. Yes, the IMF is not talking about our enmity, it is saying, clean your house, Pakistan is not fixing the internal problems, so is it the fault of the IMF or is it country? the country have not done structural reforms, so today it is our turn.

On this occasion, the well-known businessman and industrialist Mian Zahid Hussain said that signing an agreement with the IMF is a double joy of Eid for Pakistan, but $3 billion will not come from the Islamic Development Bank and the World Bank after the IMF agreement. You will also get money.

Economist Shahid Ali said that the IMF agreement is a very positive development, a 9-month program has been found and the country got a new road map. Should and the govt has to open the import.

Talking to the panel of economic experts, Malik Bustan said that the IMF agreement is a great news on the occasion of Eid, Pakistan has to fulfill its agreements, now the closed doors have been opened by getting funds, it will increase foreign exchange, markets. If it opens, the dollar rate will be reduced by 5 to 10 rupees immediately.

Economic expert Khaqan Najib said that Pakistan has reserves of 4 billion dollars, 6 billion dollars have to be given in the next 6 years, 1 billion dollars will come from the IMF in July, the pressure on the reserves for a short period of time will end and Some burden of inflation will be reduced.

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