WASHINGTON: In a significant development, the Executive Board of the International Monetary Fund (IMF) announced on Thursday that it had successfully concluded the first review of Pakistan’s economic reform programme, backed by the Stand-By Arrangement (SBA), paving the way for an immediate disbursement of SDR 528 million, equivalent to approximately $700m.

This latest disbursement brings the cumulative total under the arrangement to an impressive SDR 1.422 billion, roughly $1.9bn. The financial support provided by the IMF underscores the global confidence in Pakistan’s commitment to implementing essential economic reforms.

The successful review signifies a crucial step forward for Pakistan as it continues to navigate economic challenges and work towards fostering stability. The disbursement is expected to provide the much-needed support to the country’s financial framework, facilitating the implementation of key reforms outlined in the IMF-supported programme.

The board’s decision reflects a recognition of Pakistan’s efforts in add­re­ssing economic vulnerabilities and implementing policy measures aimed at promoting sustainable growth.

“Economic activity has stabilised in Pakistan, although the outlook remains challenging and dependent on the implementation of sound policies,” the IMF board observed.

It also said that “continued timely and consistent implementation of programme policies remains critical, with no room for slippage”.

The board reminded Pakistan that it “requires strict adherence to fiscal targets while protecting social spending, a market-determined exchange rate to absorb external shocks, and further progress on structural reforms to support stronger and more inclusive growth”.

The IMF board noted that macroeconomic conditions in Pakistan have generally improved, with the growth of 2pc expected in FY24 as the nascent recovery expands in the second half of the year. The fiscal position also strengthened in FY24Q1 achieving a primary surplus of 0.4pc of GDP driven by overall strong revenues.

Inflation remains elevated, altho­ugh with appropriately tight policy, this could decline to 18.5pc by the end of June 2024. Gross reserves incre­ased to $8.2bn in December 2023, up from $4.5bn in June, while the exch­ange rate has been broadly stable.

The current account deficit is expected to rise to around 1.5pc of GDP in FY24 as the recovery takes hold. Assuming sustained sound macroeconomic policy and structural reform implementation, inflation should return to the State Bank of Pakistan’s target and growth continue to strengthen over the medium term.

The IMF stressed that boosting jobs and inclusive growth in Pakistan requires continuing protection of the vulnerable through Benazir Income Support Progra­mme and accelerating structural reforms.

It also emphasised the need for improving the business environment and levelling the playing field for investors, advancing the SOE reform agenda and safeguards related to the Sovereign Wealth Fund.

Published in Dawn, January 12th, 2024

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