Washington The Executive Board of the International Monetary Fund (IMF) approved a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of SDR2,250 million (about $3 billion, or 111 percent of quota) to support the authorities’ economic stabilization program.
The arrangement comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods, and policy missteps have led to large fiscal and external deficits, rising inflation, and eroded reserve buffers in FY23.
Pakistan’s new SBA-supported program will provide a policy anchor for addressing domestic and external imbalances and a framework for financial support from multilateral and bilateral partners. The program will focus on
1 Implementation of the FY24 budget to facilitate Pakistan’s needed fiscal adjustment and ensure debt sustainability, while protecting critical social spending;
2 A return to a market-determined exchange rate and proper FX market functioning to absorb external shocks and eliminate FX shortages;
3 An appropriately tight monetary policy aimed at disinflation;
4 Further progress on structural reforms, particularly with regard to energy sector viability, SOE governance, and climate resilience.
The Executive Board’s approval allows for an immediate disbursement of SDR 894 million (or about US$1.2 billion). The remaining amount will be phased over the program’s duration, subject to two quarterly reviews.
Prime Minister Shehbaz Sharif has termed approval of Stand-by Agreement of three billion dollars by the IMF’s Executive Board as a major step forward in the government’s efforts to stabilise the economy and achieve macroeconomic stability.
In a tweet on Wednesday, he said it bolsters Pakistan’s economic position to overcome immediate- to medium-term economic challenges, giving next government the fiscal space to chart the way forward.
Commending the Finance Minister Ishaq Dar and his team at the Ministry of Finance for their hard work, the Prime Minister said this milestone, which was achieved against the heaviest of odds and against seemingly impossible deadline, could not have been possible without excellent team effort.
Shehbaz Sharif also extended special thanks to IMF Managing Director Kristalina Georgieva and her team for their support and cooperation.