IMF Executive Board approves final review of SBA, allows disbursement of $1.1bn for Pakistan

The International Monetary Fund (IMF) on Monday completed its final review of Pakistan’s economic reform programme supported by a $3 billion Stand-By Arrangement (SBA) and allowed the immediate disbursement of $1.1 billion.

The development comes after Pakistani authorities reached a staff-level agreement with the IMF on the second and final review of the SBA last month.

“Today, the Executive Board of the International Monetary Fund completed the second and final review of Pakistan’s economic reform programme supported by the IMF’s Stand-By Arrangement. The Board’s decision allows for an immediate disbursement of SDR 828 million (around $1.1 billion), bringing total disbursements under the arrangement to SDR 2.250 billion (about $3 billion),” IMF said in its statement.

With the latest development, the remaining access under the SBA, $1.1 billion, is now available for Pakistan, completing the 9-month arrangement for the country.

“The completion of the second and final review reflects the authorities’ stronger policy efforts under the SBA, which have supported the stabilisation of the economy and the return of modest growth,” IMF said.

“To move Pakistan from stabilisation to a strong and sustainable recovery the authorities need to continue their policy and reform efforts, including strict adherence to fiscal targets while protecting the vulnerable; a market-determined exchange rate to absorb external shocks; and broadening of structural reforms to support stronger and more inclusive growth,” the Bretton Woods institution added.

Pakistan is now looking to secure a larger and longer Extended Fund Facility (EFF) of the IMF programme to achieve macroeconomic stability in the country.

On Sunday, Prime Minister Shehbaz Sharif called on the IMF managing director Kristalina Georgieva and reiterated his government’s commitment to put Pakistan’s economy back on track, state-run APP reported.

The meeting was held on the sidelines of the World Economic Forum Special Meeting in Saudi Arabia.

As per details, the prime minister apprised the IMF’s MD that he had directed his financial team, led by Finance Minister Muhammad Aurangzeb to carry out structural reforms, ensure strict fiscal discipline, and pursue prudent policies that would ensure macro-economic stability and sustained economic growth.

Both sides also discussed Pakistan entering into another IMF programme to ensure that the gains made in the past year were consolidated and its economic growth trajectory remained positive.

Following the Executive Board discussion, Antoinette Sayeh, Deputy Managing Director and Chair, said, “Pakistan’s determined policy efforts under the 2023 Stand‑By Arrangement have brought progress in restoring economic stability”.

She added that moderate growth had returned; external pressures eased; and while still elevated, inflation had begun to decline.

“Given the significant challenges ahead, Pakistan should capitalise on this hard‑won stability, persevering—beyond the current arrangement—with sound macroeconomic policies and structural reforms to create stronger, inclusive, and sustainable growth. Continued external support will also be critical,” Antoinette Sayeh said.

She further said Pakistan authorities had stabilised the energy sector’s circular debt over the course of the SBA through timely tariff adjustments and enhanced collection efforts.

Energy sector: Major step taken towards reducing circular debt

“While these actions need to continue, it is also critical that the authorities undertake cost‑side reforms to address the sector’s underlying issues and viability.”

The IMF official said the State Bank of Pakistan’s (SBP) tight monetary policy stance “remains appropriate until inflation returns to more moderate levels.”

The central bank on Monday kept the key interest rate steady at 22% for the seventh straight meeting.

She said the rebuilding of foreign exchange reserves - currently standing at $7.981 billion as of April 19 - under the SBA needed to continue.

“Moreover, stronger action to address undercapitalised financial institutions and, more broadly, vigilance over the financial sector are needed to ensure financial stability.”

The IMF approved the $3 billion SBA for Pakistan in July, 2023. As per the lender, the programme focused on:

• Necessary fiscal adjustment and maintenance of debt sustainability via FY24 budget implementation;

• Protection of critical social spending;

• Buffering external shocks and eliminating foreign exchange shortages by returning to proper FX market functioning;

• Making progress on disinflation by maintaining a tight monetary policy; and

• Furthering progress on structural reforms, focused on energy sector viability, SOE governance, and climate resilience.