Pakistan, IMF reach $3bn staff-level agreement

The International Monetary Fund (IMF) has reached a staff-level pact with Pakistan on a $3 billion stand-by arrangement, a decision long awaited by the South Asian nation which is teetering on the brink of default, reports Dawn.

An IMF press release reads, "The IMF staff and the Pakistani authorities have reached a staff-level agreement on policies to be supported by a Stand-By Arrangement (SBA)."

The deal — subject to approval by the IMF board in July — 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.

Spread over nine months, the funding is higher than expected for the country, which was awaiting the release of the remaining $2.5bn from a $6.5bn bailout package agreed upon in 2019 that expired on Friday.

This new stand-by arrangement builds on the 2019 programme, IMF official Nathan Porter said in a statement on Thursday.

He added that Pakistan's economy had faced several challenges in recent times, including devastating floods last year and commodity price hikes following the war in Ukraine.

IFM in their press release added that the new SBA will "support the authorities'" immediate efforts to stabilise the economy from recent external shocks, preserve macroeconomic stability and provide a framework for financing from multilateral and bilateral partners."

It further said, "Steadfast policy implementation is key for Pakistan to overcome its current challenges, including through greater fiscal discipline, a market-determined exchange rate to absorb external pressures, and further progress on reforms, particularly in the energy sector, to promote climate resilience, and to help improve the business climate."

The IMF noted that Pakistan’s parliament had approved the FY24 budget “in line with the goals of supporting fiscal sustainability and mobilising revenue, which will enable greater social and development spending”.

It went on to note that the State Bank of Pakistan (SBP) has "withdrawn the guidance on import prioritisation and is committed to ensuring the full market determination of the exchange rate."

The international lender emphasised, "The full and timely implementation of the program will be critical for its success in light of the difficult challenges."

/KN/