WASHINGTON: The Executive Board of the International Monetary Fund (IMF) on Monday approved the immediate disbursement of approximately $1.1 billion to Pakistan.

The board met in Washington on Monday and completed the second review under the Stand-By Arrangement (SBA) for Pakistan, allowing for bringing total disbursements under the arrangement to about $3 billion.

All board members favoured releasing the last installment except India, which abstained.

“The completion of the second and final review ref­lects the authorities’ stron­ger policy efforts under the SBA, which have supported the stabilisation of the economy and the ret­urn of modest growth,” the IMF said in a statement.

“To move Pakistan from stabilization to a strong and sustainable recovery the authorities need to continue their policy and reform efforts, including strict adherence to fiscal targets,” the statement added.

The Fund also reminded Pakistan that while doing so, it also needs to protect the vulnerable from the possible impact of such reforms.

The IMF also emphasised the need to adhere to “a market-determined exchange rate to absorb external shocks; and broadening of structural reforms to support stronger and more inclusive growth.

Following the Executive Board’s discussion, Deputy Managing Director Antoinette Sayeh made the following statement:

“Pakistan’s determined policy efforts under the 2023 Stand‑By Arrangement (SBA) have brought progress in restoring economic stability. Moderate growth has returned; external pressures have eased; and while still elevated, inflation has begun to decline. Given the significant challenges ahead, Pakistan should capitalize on this hard‑won stability, persevering—beyond the current arrangement—with sound macroeconomic policies and structural reforms to create stronger, inclusive, and sustainable growth. Continued external support will also be critical.

“The authorities’ revenue performance, as well as federal spending restraint, helped achieve a sizeable primary surplus in the first half of FY2024, in line with program targets. Continued revenue mobilization efforts and spending discipline at both federal and provincial levels remain critical to ensure that the primary surplus target is achieved. Beyond FY2024, continued fiscal sustainability and additional space for social and development spending depend on further mobilizing revenues, especially from non‑filers and undertaxed sectors, and on improving public financial management.”

“The authorities have stabilized the energy sector’s circular debt over the course of the SBA through timely tariff adjustments and enhanced collection efforts. While these actions need to continue, it is also critical that the authorities undertake cost‑side reforms to address the sector’s underlying issues and viability.

“The State Bank of Pakistan’s tight monetary policy stance remains appropriate until inflation returns to more moderate levels. Further improvements in the functioning of the foreign exchange (FX) market, together with a market‑determined exchange rate, will help buffer external shocks and attract financing, thereby supporting competitiveness and growth. The significant rebuilding of FX reserves under the SBA needs to continue. Moreover, stronger action to address undercapitalized financial institutions and, more broadly, vigilance over the financial sector are needed to ensure financial stability.

“Achieving strong, long‑term inclusive growth and creating jobs require accelerating structural reforms and continued protection of the most vulnerable through an adequately‑financed Benazir Income Support Program. Priorities include advancing the reform of state-owned enterprises (SOEs), including to ensure that all SOEs fall under the new policy framework; strengthening governance and anti‑corruption institutions; and continuing to build climate resilience.”

Published in Dawn, April 30th, 2024