According to a recent staff-level agreement, the International Monetary Fund (IMF) has confirmed that Pakistan is requesting its 24th rescue package. This deal attempts to address Pakistan’s long-standing fiscal and external sustainability concerns and comes after the successful completion of the current short-term facility.
According to the IMF’s statement, if the deal is approved by the IMF’s executive board, Pakistan may be able to access about USD 1.1 billion (or 828 million special drawing rights) by the end of April.
In order to increase the sustainability of debt and provide cash for social assistance, this entails a gradual fiscal consolidation and a broadening of the tax base, especially in undertaxed industries like real estate and agriculture.
The program’s objectives include improving electricity transmission and distribution, tackling power theft, and enacting cost-cutting changes in the energy industry.
In order to rebuild foreign exchange reserves and facilitate external rebalancing, a transparent foreign exchange market will be encouraged.
In order to promote sustainable economic growth, the program will invest in human capital and reform state-owned businesses to support private-led growth.
Recent improvements in Pakistan’s economic situation have been attributed to the “strong program implementation” by the State Bank and caretaker government, according to the IMF. There are still issues, though, as inflation is still higher than desired and growth prospects are limited. Addressing these economic vulnerabilities in the face of substantial local and international finance needs is thought to need ongoing policy measures.
Given that the existing USD 3 billion Stand-By Arrangement is about to expire, Finance Minister Muhammad Aurangzeb has stated that talks with the IMF are a top priority for his new government. Pakistan was able to prevent a possible default on its foreign liabilities last year thanks in large part to the IMF’s prompt assistance.
