ISLAMABAD: The International Monetary Fund (IMF) has stated that Pakistan’s economic challenges are complex and multifaceted, and risks are exceptionally high and addressing them would require steadfast implementation of agreed policies, as well as continued financial support from external partners.
The Staff Report prepared by a staff team for the Executive Board of the IMF consideration on July 12, 2023, following discussions with the officials of Pakistan on economic developments under the Stand-By Arrangement, the IMF further stated consistent and decisive implementation of programme agreements will be essential to reduce risks and maintain macroeconomic stability.
Policies under the new programme aim to support the authorities’ immediate efforts to stabilise the economy and rebuild buffers. Key policy pillars include:(i) an appropriate fiscal year 2024 budget to support needed fiscal adjustment; (ii) a return to a market-determined exchange rate and proper functioning of the foreign exchange (FX) market to absorb balance of payment (BOP) pressures and eliminate FX shortages; (iii) adequately tight monetary policy to support disinflation and anchor expectations; and (iv) continuation of structural efforts to strengthen energy sector viability, SOE governance, and the banking sector, while supporting efforts to build Pakistan’s climate resilience.
Resolving Pakistan’s structural challenges, including long-term BOP pressures, will require continued adjustment and creditor support beyond the programme period. A possible successor arrangement could help anchor the policy adjustment needed to restore Pakistan’s medium-term viability and capacity to repay.
The authorities have requested a 9-month Stand-By Arrangement (SBA) in the amount of SDR 2,250 million (111 percent of quota or about US$3.0 billion) and believe that the SBA can play a crucial role in rebuilding confidence by anchoring policies during the upcoming period and providing a framework that could catalyse support from multilateral and bilateral creditors, which is crucial for Pakistan to meet its large financing needs in fiscal year 2024.
Copyright Business Recorder, 2023
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