Pakistan, IMF reach staff-level agreement on first review for 9-month Stand-By Arrangement

In a major breakthrough, the International Monetary Fund (IMF) announced on Wednesday that its staff and Pakistani authorities have reached an agreement on the first review of the $3-billion, nine-month Stand-By Arrangement (SBA).

The staff-level agreement is subject to approval by the IMF Executive Board.

“The IMF team has reached a staff-level agreement (SLA) with the Pakistani authorities on the first review of their stabilisation program supported by the IMF’s US$3 billion (SDR2,250 million) SBA,” the financial agency said in its press release.

“The agreement is subject to approval of the IMF’s Executive Board. Upon approval around US$700 million (SDR 528 million) will become available bringing total disbursements under the program to almost US$1.9 billion,” it added.

An IMF team, led by Nathan Porter, visited Islamabad from November 2-15, 2023, to hold discussions on the first review of Pakistan’s economic program supported by the IMF SBA.

IMF Executive Board approves $3bn Stand-By Arrangement for Pakistan

“Anchored by the stabilisation policies under the SBA, a nascent recovery is underway, buoyed by international partners’ support and signs of improved confidence. 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.

“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,” Porter was quoted as saying in the press release.

IMF Mission calls on interim PM Kakar

During the day, the IMF Mission Chief for Pakistan Nathan Porter and IMF Resident Representative for Pakistan Esther Perez Tuiz called on the Caretaker Prime Minister Anwaar-ul-Haq Kakar today and apprised him of status of the negotiations held at the technical levels with the government’s team under the first review of the SBA, the Prime Minister Office (PMO) shared in a post on X, formerly Twitter.

“Nathan Porter acknowledged the efforts made by the Government of Pakistan in meeting the various program quarterly targets. He stated that these efforts have resulted in positive conclusion of the technical level talks,” the PMO statement read.

Kristalina Georgieva expects deal ‘within this week’

Earlier, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF) said she expected a deal on the ongoing first review of the SBA ‘within this week’.

“I expect an agreement on the review to come within this week,” said Georgieva in an interview with Bloomberg TV’s Haslinda Amin on Wednesday.

“Pakistani authorities and the Caretaker Finance Minister deserve credit for sticking to the program that they have in a very difficult time,” she said.

Georgieva termed lower tax collection as the “parental issue” of Pakistan, as the country tax-to-GDP ratio remains at 12%.

“We are saying it has to be at least 15% to have the revenues to sustain the functioning of Pakistan,” she said while urging authorities to collect taxes that can pay them.