IMF reaches staff-level agreement with Pakistan on $700 mn bailout review

Pakistan and the IMF reached a staff-level agreement for the release of a USD 700 million second tranche of an ongoing USD 3 billion bailout package, the global lender said on Wednesday, in a major relief to the cash-strapped country.

While approving the USD 3 billion loan in July this year, the International Monetary Fund (IMF)had also released the first tranche of USD 1.2 billion.

Although essentially a bridge loan, it offered much respite to Pakistan, battling an acute balance of payments crisis and falling foreign exchange reserves.

A team led by the IMF mission chief for Pakistan, Nathan Porter, visited Islamabad from November 2-15 to hold discussions on the first review of the country's economic programme supported by a stand-by arrangement (SBA), according to a statement issued by the global lender after the discussions.

The IMF team has reached a staff-level agreement (SLA) with the Pakistani authorities on the first review of their stabilisation programme supported by the IMF's USD 3 billion, the statement said.

The agreement is subject to the approval of the IMF's Executive Board. Upon approval, around USD 700 million will become available, bringing total disbursements under the programme to almost USD 1.9 billion, it added.

Porter said that anchored by the stabilisation policies under the SBA, "a nascent recovery is underway, buoyed by international partners' support and signs of improved confidence."

Pointing out that the steadfast execution of the FY24 budget, continued adjustment of energy prices, and renewed flows into the foreign exchange (FX) market have lessened fiscal and external pressures, he said that inflation is expected to decline over the coming months amid receding supply constraints and modest demand.

However, Pakistan remains susceptible to significant external risks, including the intensification of geopolitical tensions, resurgent commodity prices, and the further tightening in global financial conditions. Efforts to build resilience need to continue, he said.

The Washington-based global lender advised Pakistan to continue fiscal consolidation to reduce public debt while protecting development needs and strengthening the social safety net to better protect the vulnerable.

It also asked for reforms to reduce costs in the energy sector and restore its viability.

The successful conclusion of talks comes as the country races towards the general elections scheduled for February 8 and is expected to help stabilise its economy.

Pakistan's economy has been in a free fall mode for the last many years, bringing untold pressure on the poor masses in the form of unchecked inflation, making it almost impossible for a vast number of people to make ends meet.