IMF approves $7bn program, allows disbursement $1bn

WASHINGTON DC: The Executive Board of the international Monetary Fund (IMF) concluded the 2024 Article IV consultation and approved a 37-month extended arrangement under the Extended Fund Facility (EFF) for Pakistan in the amount of SDR 5,320 million (262 per cent of quota, or around $7 billion), IMF press statement said late night on Wednesday.

The Board’s decision allows for an immediate disbursement of SDR 760 million (or about $1 billion).

The IMF statement said, “Pakistan has taken key step to restoring economic stability with consistent policy implementation under the 2023-24 Stand-By Arrangement (SBA).” Growth has rounded (2.4 per cent in FY24), supported by activity in agriculture, while inflation has receded significantly, and falling to single digits.

Because of the progress and stability achieved under the 9-month 2023 SBA, the authorities are embarking on renewed efforts to address these challenges, build resilience and enable sustainable growth.

Key priorities under the new EFF-supported program include..

i)Rebuilding policy making credibility and entrenching macroeconomic sustainability through consistent implementation of sound macro policies and a broadening of the tax base

ii)Advancing reforms to strengthen competition and raise productivity and competitiveness,

iii)Reforming SOEs and improving public service provision and energy sector viability, and

iv)Building climate resilience.

The new program will require sound polices and reforms to support the authorities ongoing efforts to strengthen macroeconomic stability, address deep structure challenges, and create conditions for a stronger, more inclusive and resilient growth.

Despite this progress, the Fund said that Pakistan vulnerabilities and structure challenges remain formidable.

IMF said a difficult business environment, weak governance, and an outside role of the state hinder investment, which remains very low compared to peers, while the tax base remained too narrow to ensure tax fairness, fiscal sustainability and meet Pakistan’s large social and development spending needs, IMF statement said.

In particular, spending on health and education has been insufficient to tackle persistent poverty, and inadequate infrastructure investment has limited economic potential and left Pakistan vulnerable to the impact of climate change, statement added.

Without a concerted adjustment and reform efforts, Pakistan risks falling further behind its peers, the statement said.

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