The International Monetary Fund (IMF) on Thursday said a stable policy implementation is critical in the coming period after Pakistan approved a bailout package for the cash-strapped country.
“This will be critical to the success of the program and, of course, ultimately, to the support and assistance of the Pakistani people,” IMF spokeswoman Julie Kozek said at a press conference.
As part of a short-term plan, the IMF earlier this week approved a nine-month $3 billion Standby Arrangement (SBA) for Pakistan to support the authorities’ economic stabilization program.
The Stand-By Arrangement (SBA) for Pakistan 🇵🇰 comes at a challenging juncture. It aims to stabilize the economy & address the needs of the Pakistani people. Steadfast implementation is critical to address its large financing needs & support the most vulnerable. pic.twitter.com/2BfDQxvih2
— Julie Kozack (@IMFSpokesperson) July 13, 2023
The government had been trying to get a loan from the IMF for the past eight months, but an old program expired due to disagreements over fiscal policies. However, the lender and Pakistan agreed to the SBA, saving the nation from sovereign default.
The IMF has called on Pakistan to strengthen its public finances, increase its tax revenue, maintain discipline on non-essential core spending and reduce the revolving debt of the energy sector.
Kuzek said the fund has provided $1.2 billion to Pakistan – the rest will be disbursed after two reviews in November and February.
“The new program will anchor the authorities’ urgent efforts to stabilize the economy […] and to ensure that current balance of payments needs are met,” the spokesman said.
“To provide a framework for financing from multilateral and bilateral partners with adequate protection for the most vulnerable and to support government policies.”
Although this is a relatively short program, Kozek said it gives Pakistan time to implement key policies to strengthen its domestic and external economic situation, thereby helping sustainability.
Addressing Pakistan’s structural challenges, he said, would likely require sustained reforms in the medium term to underpin needed economic transformations, strengthen prospects for inclusive growth and renew private capital. A favorable environment can be created for
“And of course, we at the IMF, we are always ready to work with Pakistan and the Pakistani government on efforts to restore stability and economic stability.”
The South Asian nation is grappling with a balance of payments crisis as it tries to service non-performing external debt amid a fraught political environment — following the ouster of the country’s former prime minister Imran Khan.
Inflation has soared, the rupee has hit a record low against the dollar, and the country is struggling to afford imports, leading to a sharp decline in industrial output.
Pakistan has brokered nearly two dozen arrangements with the IMF, most of which have been incomplete.
A few days before the decision was passed, Pakistan had received $3 billion in deposits from Saudi Arabia and the United Arab Emirates.
The central bank’s foreign exchange reserves rose by $61 million to close at $4.52 billion in the week ended July 7, according to official data on Thursday.
