IMF delves into reasons behind ‘shorter’ programme with Pakistan

The International Monetary Fund (IMF) said the recently-approved Stand-By Arrangement with Pakistan is aimed at supporting the country’s immediate effort to stabilise the economy and ensure the current balance of payments need is filled.

In a press briefing on Thursday, Julie Kozack, IMF’s Director of Strategic Communications (COM), said that while it is relatively a short programme, the nine-month SBA “provides time for Pakistan to implement policies critical to strengthening its domestic and external economic situation, thereby supporting sustainability”.

“Resolving Pakistan’s structural challenges will likely require continued reforms over the medium term to underpin the needed economic transformations, to strengthen inclusive growth prospects, and create an environment conducive to renewed private capital inflows,” Kozack responded when asked by a journalist if the nine-month SBA would be enough to get Pakistan out of its current economic turmoil.

Steadfast policy implementation is critical in the period ahead. This will be critical for success of the programme: Julie Kozack, IMF’s Director of Strategic Communications

Kozack reiterated that the the IMF stands “ready to work with Pakistan and its government on efforts to restore sustainability and an economic stability”.

However, the senior IMF official also warned that policy implementation would remain key to the SBA’s success.

“Steadfast policy implementation is critical in the period ahead. This will be critical for success of the programme and, of course, ultimately, to aid and support the people of Pakistan.”

Kozack’s statement comes as Pakistan’s government hailed the new SBA, seen by many as an upgrade to the now-lapsed Extended Fund Facility.

While the previous unsuccessful ninth review would have seen around $1.1 billion as inflow, Pakistan managed to secure a new nine-month programme with a fresh disbursement of $3 billion, subject to two more reviews – in November 2023 and February 2024.

On Thursday, Pakistan’s central bank also received $1.2 billion, the first of three tranches from the IMF.

However, the new IMF arrangement also extends Pakistan’s commitment well into the second half of fiscal year 2023-24, raising questions on whether Islamabad, which would see a change in government around the time of the second review of the SBA, would be able to continue the reform process committed to the lender.

Earlier this month, before the IMF Executive Board meeting, the lender’s staff met representatives of major political parties in Pakistan to seek assurances of their support for the key objectives and policies under the programme ahead of the approaching national elections.

Pakistan, currently in the midst of economic turmoil due to dollar shortage and runaway inflation, has seen a slight change in sentiment with Saudi Arabia, the UAE, and IMF extending a helping hand along with Fitch Ratings also upgrading the country’s status to ‘CCC’ from ‘CCC-’.