ISLAMABAD: The International Monetary Fund (IMF) Executive Board completed the second review under the Stand-By Arrangement (SBA) for Pakistan, allowing for an immediate disbursement of SDR 828 million (around $1.1 billion), bringing total disbursements under the arrangement to SDR 2.250 billion (about $3 billion).
The fund and Pakistan had reached Staff Level Agreement on second and final review on March 20, 2024 for remaining $1.1 under SBA.
Pakistan’s 9-month SBA, approved by the Executive Board on July 12, 2023, successfully provided a policy anchor to address domestic and external imbalances as well as a framework for financial support from multilateral and bilateral partners, IMF said in a statement received here.
The statement said, macroeconomic conditions have improved over the course of the program, adding growth of 2 percent is expected in FY24 given continued recovery in the second half of the fiscal year.
The fiscal position continues to strengthen with a primary surplus of 1.8 percent of GDP achieved in the first half of fiscal year 2024, well ahead of projections and putting Pakistan on track to achieve its end-FY24 target primary surplus of 0.4 percent of GDP.
Inflation, while still elevated, continues to decline, and, with appropriately tight, data-driven monetary policy maintained, is expected to reach around 20 percent by end-June. Assuming ongoing sound policies and reform efforts, inflation should return to the SBP’s target with growth continuing to strengthen over the medium term, the statement said adding the gross reserves have increased to around $8 billion, up from $4.5 billion at the start of the program, and are projected to continue being rebuilt over the medium term.
“Pakistan’s determined policy efforts under the 2023 Stand By Arrangement (SBA) have brought progress in restoring economic stability. Moderate growth has returned; external pressures have eased; and while still elevated, inflation has begun to decline,” said Antoinette Sayeh, Deputy Managing Director and Chair, after Executive Board discussion.
Given the significant challenges ahead, Pakistan should capitalize on this hard won stability, persevering—beyond the current arrangement—with sound macroeconomic policies and structural reforms to create stronger, inclusive, and sustainable growth.
Continued external support will also be critical, Sayeh added. It is pertinent to mention here that the International Monetary Fund (IMF) Executive Board in mid July 2023 had approved the Stand-by Agreement (SBA) for US$ 3 billion for Pakistan. The staff level agreement on SBA amounting SDR2,250 million (about $3 billion or 111 percent of Pakistan’s IMF quota) was reached during the last week of June after IMF staff team led by Nathan Porter held in person and virtual meetings with the Pakistani authorities to discuss a new financing engagement for Pakistan under the arrangement.
On July 13, the fund transferred US$1.2 billion to State Bank of Pakistan (SBP) out of total $3 billion under the agreement that was approved by the IMF board the previous day.
The balance amount of $1.8 billion was to be provided after two reviews that would be held in November 2023 and February 2024. Staff level agreement on first review was made in mid November 2023 after which the fund had transferred $700 million after approval from its executive board in January 2011.
