The International Monetary Fund (IMF) Executive Board has approved a 9-month Stand-By Arrangement (SBA) for Pakistan in the sum of SDR2,250 million (about $3 billion, or 111 percent of quota) to assist the authorities’ economic stabilisation programme.
The agreement comes at a difficult time for Pakistan’s economy. A tough external environment, severe floods, and policy blunders have resulted in huge fiscal and external deficits, rising inflation, and dwindling reserve buffers in FY23, according to the IMF.
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Pakistan’s new SBA-supported programme will serve as a policy anchor for addressing domestic and foreign imbalances, as well as a framework for financial assistance from multilateral and bilateral partners, according to the statement.
According to the statement, the programme will focus on (1) implementing the FY24 budget to facilitate Pakistan’s needed fiscal adjustment and ensure debt sustainability, while protecting critical social spending; (2) reverting to a market-determined exchange rate and proper FX market functioning to absorb external shocks and eliminate FX shortages; (3) an appropriately tight monetary policy aimed at disinflation; and (4) further progress on structural reforms, particularly privatisations.
The agreement of the Executive Board allows for an immediate disbursement of SDR894 million (about $1.2 billion). The remaining funds will be phased in throughout the course of the programme, with two quarterly evaluations, according to the statement.