Islamabad : May 10, 2024 : In its report on Pakistan’s economy , the International Monetary Fund (IMF) on Friday noter that there are signs of economic stabilization are strengthening, with
gradual disinflation underway and external pressures easing further since the first review on the back of improved fiscal balances. However, the outlook remains challenging, with downside risks remaining exceptionally high.
It noter that the 9-month Stand-by Arrangement (SBA), approved on
July 12, 2023, is on track with key program objectives largely achieved . It noter that all seven QPCs and all four ITs forend-December were met. All structural benchmarks since the completion of the first review were also met. Support from multilateral and
bilateral creditors remains strong and the program is financed.
Policies. The new coalition government that took office on March 11 expressed its commitment to continue to implement policies in line with the SBA to address
Pakistan’s structural weaknesses and cement the stability established over the past 9 months. In this regard, strict adherence to the FY24 fiscal target and further adjustment beyond FY24, while protecting development needs and the social safety net, are essential to alleviate external and domestic pressures and ensure fiscal
sustainability. A flexible exchange rate is necessary to buffer shocks and rebuild
reserves, and monetary policy should remain tight to bring inflation to more moderate levels and agile to respond proactively if signs of inflation reemerge. It said continued regular
energy tariff adjustments, keeping pace with costs, are necessary to end the creation of CD, but broader reforms are needed to fundamentally restore energy sector viability.
Further progress is also needed on the state-owned enterprise and broader governance reform agendas, which are critical to spur private sector investment, activity, and jobs.
SBA review. Staff supports completion of the review, which would make available SDR 828 million, bringing total access to SDR 2,250 million, and help anchor essential financing from official partners. IMF has released its report on Pakistan exactly at the time when its advance team landed in Islamabad for negotiating another long term bailout package.
