Washington, DC, July 12, 2023 – In a move to bolster Pakistan economic stabilization efforts, the Executive Board of the International Monetary Fund (IMF) has granted its approval for a nine-month Stand-By Arrangement (SBA) worth SDR2,250 million (equivalent to approximately $3 billion or 111 percent of quota).
This financial support aims to assist the Pakistani authorities in addressing the challenging economic situation currently faced by the nation.
Pakistan finds itself grappling with an unfavorable external environment, the devastating impact of floods, and previous policy missteps that have resulted in significant fiscal and external deficits, surging inflation rates, and depleted reserve buffers throughout the fiscal year 2023.
Under the newly approved SBA, Pakistan will have access to crucial funds that will serve as a policy anchor for rectifying domestic and external imbalances. Moreover, this arrangement will establish a framework for financial backing from both multilateral and bilateral partners. The program’s key objectives will revolve around several core areas, including:
Implementation of the fiscal year 2024 budget: This will facilitate Pakistan’s necessary fiscal adjustment, ensuring debt sustainability while safeguarding critical social expenditure.
Market-determined exchange rate and improved foreign exchange market functioning: The reintroduction of a flexible exchange rate system will allow for the absorption of external shocks and the elimination of foreign exchange shortages.
Adoption of a tight monetary policy: By implementing appropriately stringent monetary measures, the aim is to combat inflationary pressures and achieve disinflation.
Progress in structural reforms: Special emphasis will be placed on enhancing the viability of the energy sector, improving the governance of state-owned enterprises (SOEs), and bolstering climate resilience.
The approval granted by the IMF’s Executive Board paves the way for an immediate disbursement of SDR894 million (equivalent to approximately US$1.2 billion). The remaining amount will be phased out over the program’s nine-month duration, contingent upon two quarterly reviews to assess the program’s progress.
Pakistan’s government welcomes this crucial financial support, as it sets a solid foundation for the nation’s economic recovery and stability. The IMF’s backing not only provides Pakistan with the necessary resources but also signals confidence in the authorities’ commitment to implementing essential reforms. With this support, Pakistan aims to navigate through its economic challenges and emerge stronger and more resilient in the years ahead.
