IMF to Conduct Final Review of Pakistan’s Stand-By Arrangement, Nation Seeks Longer-Term Bailout
Pakistan Seeks Extended Financial Support Amidst IMF Review
The International Monetary Fund (IMF) is set to conduct the final review of Pakistan’s $3 billion stand-by arrangement (SBA) this week, marking the culmination of the current program. Pakistan intends to request a new, longer-term bailout during these discussions.
Final Review Underway
The four-day review, commencing on Thursday, will determine the release of the final tranche of approximately $1.1 billion from the IMF. Successful completion of this review is crucial for Islamabad to avoid a sovereign debt default, as per the finance ministry.
Meeting IMF Criteria
Pakistan has reportedly fulfilled all structural benchmarks, qualitative performance criteria, and indicative targets set by the IMF for the successful completion of the review. The finance ministry is optimistic about reaching a staff level agreement with the IMF after the appraisal.
Transition to a New Program
With the current SBA-supported program concluding in April 2024, Prime Minister Shehbaz Sharif has instructed his finance team to begin preparations for seeking an Extended Fund Facility (EFF). Finance Minister Muhammad Aurangzeb aims to advocate for a larger, long-term program during the IMF review.
Medium-Term Program Consideration
The IMF has indicated its willingness to formulate a medium-term program if Pakistan applies for one. However, the government has not disclosed the exact amount of additional funding it seeks through a successor program.
Future Discussions
Aurangzeb has expressed Pakistan’s keenness to initiate discussions on another EFF during the current review. Further talks are expected to take place during the IMF and World Bank’s spring meetings in April in Washington.
Economic Analyst’s Perspective
Sajid Amin Javed, Deputy Executive Director at Sustainable Development Policy Institute, emphasized the urgency of a new IMF program for managing external financing needs and economic recovery. He commended the government’s clear approach in engaging with the IMF promptly.
Economic Challenges
Pakistan’s economy faces significant challenges, including low reserves, a balance of payment crisis, high inflation, and record depreciation of the local currency. Previous IMF conditions, including budget revisions and tax increases, have contributed to economic strains.
Transition to Long-Term Programme
Prime Minister Shehbaz Sharif has instructed the finance team to prepare for an Extended Fund Facility (EFF) after the SBA expires in April. Finance Minister Muhammad Aurangzeb stated that Pakistan will advocate for a larger, long-term programme during the IMF review.
Potential Medium-Term Programme
The IMF indicated its willingness to discuss a medium-term programme if Pakistan applies for one. However, the government has not disclosed the size of the funding it seeks through a successor programme.
Seeking Stability and Recovery
Aurangzeb aims to stabilize Pakistan’s economy, which has faced numerous challenges, including low growth rates, high inflation, and currency depreciation. The country seeks immediate IMF assistance to manage external financing needs and stimulate economic recovery.
Addressing Economic Challenges
Pakistan has undertaken significant measures to meet IMF conditions, including budget revisions, interest rate hikes, and tax increases. These efforts, while necessary, have contributed to high inflation and economic strain.
Outlook and Spring Meetings
The finance minister expressed eagerness to discuss a new EFF during the IMF and World Bank’s spring meetings in April. The engagement signals a proactive approach by the new government to address economic challenges and secure necessary funding.
Expert Insight
Sajid Amin Javed, Deputy Executive Director at the Sustainable Development Policy Institute, emphasized the urgency of a new IMF programme for Pakistan’s economic stability and recovery. He praised the government’s clear approach in contrast to past delays due to political factors.
The ongoing IMF review represents a critical juncture for Pakistan’s economic future, with the outcome expected to shape its recovery efforts and long-term financial stability.
As Pakistan navigates through economic difficulties, securing a new IMF program is seen as critical for stabilizing the economy and fostering sustainable growth. The ongoing review marks a crucial juncture in the nation’s financial trajectory.