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IMF and Pakistan Reach Staff-Level Agreement on Final Review of $3 Billion Stand-By Arrangement

ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have finalized a staff-level agreement on the second and final review within the Stand-By Arrangement, clearing the path for the disbursement of the last $1.1 billion tranche from the IMF.

Under the leadership of Nathan Porter, a team from the IMF visited Islamabad from March 14-19, 2024, for discussions concerning the second review of Pakistan’s economic program supported by an IMF Stand-By Arrangement (SBA). Following these discussions, Mr. Porter issued the following statement:

As per the announcement, the IMF team has reached a staff-level agreement with Pakistani authorities concerning the second and final review of Pakistan’s stabilization program under the IMF’s US$3 billion (SDR2,250 million) Stand-By Arrangement approved in January 2024 (Press Release No. 23/261). This agreement awaits approval by the IMF’s Executive Board, after which the remaining access under the SBA, amounting to US$1.1 billion (SDR 828 million), will be accessible.

Porter acknowledged the improvements in Pakistan’s economic and financial standing since the initial review, attributing them to prudent policy management and renewed inflows from multilateral and bilateral partners. However, he cautioned that economic growth might continue to be modest in the ongoing fiscal year due to persistent inflationary pressures. He stressed the necessity for sustained policy reforms to address Pakistan’s economic vulnerabilities amidst heightened external and domestic financing needs and a volatile external environment.

Furthermore, Porter emphasized the authorities’ commitment to maintaining economic and financial stability for the remainder of the year. Key objectives outlined included achieving the FY24 general government primary balance target, broadening the tax base, implementing timely adjustments to power and gas tariffs, and ensuring a prudent monetary policy to mitigate inflation and preserve exchange rate flexibility.

Additionally, Porter mentioned Pakistan’s interest in a successor medium-term Fund-supported program aimed at tackling fiscal and external sustainability challenges, fostering economic recovery, and facilitating inclusive growth. Discussions on this are expected to commence in the near future, with a focus on enhancing public finances, revitalizing the energy sector, curbing inflation, stimulating private-led activity, and investing in human capital.

Porter extended gratitude to Pakistani authorities, the private sector, and development partners for their collaboration during the mission.

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