Factbox: What Pakistan needs to do under the IMF programme

factbox:-what-pakistan-needs-to-do-under-the-imf-programme
Factbox: What Pakistan needs to do under the IMF programme

Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement for the provision of $3 billion in bailout funds through a stand-by arrangement (SBA). This agreement replaces Pakistan’s Extended Fund Facility (EFF) program, which was set to expire on Friday. The IMF stated that the SBA builds upon the efforts made under the EFF. The approval of the staff-level agreement by the IMF board is expected to take place in mid-July.

The agreement highlights several key facts. Firstly, the IMF emphasizes the need for Pakistan to rebase tariffs in the power sector in a timely manner to ensure cost recovery, despite the already high inflation in an election year. Secondly, the central bank is urged to lift import restrictions that have hindered economic growth and led to depleting foreign exchange reserves. Thirdly, Pakistan is required to commit fully to a market-determined exchange rate and eliminate multiple exchange rate practices. Additionally, the central bank is advised to take proactive measures to reduce inflation. Lastly, stronger governance is needed to address the losses incurred by state-owned enterprises, which have negatively impacted government finances.

Despite the significant IMF bailout, the agreement emphasizes the importance of Pakistan continuing to mobilize financial support from multilateral and bilateral sources. Saudi Arabia and the United Arab Emirates have pledged a combined $3 billion, which is expected to be received following the IMF deal. Debt rollovers from China, Pakistan’s largest creditor, will also play a crucial role. Furthermore, the implementation of a spending framework for pledges made in an international donor conference earlier this year is essential, particularly for climate-related assistance to recover from devastating floods in 2022. Pakistan requires $22 billion to fulfill its external payment obligations in the upcoming financial year.

The IMF stresses the need for the revised annual budget to be executed as planned and urges authorities to resist pressures for unbudgeted spending or tax exemptions. The full and timely implementation of the program is deemed critical for its success in light of the challenging circumstances. The IMF calls for steadfast policy implementation and fiscal discipline to overcome Pakistan’s current challenges, including high inflation, a significant fiscal deficit, and low reserves.

In conclusion, the agreement between Pakistan and the IMF for a $3 billion bailout through an SBA replaces the EFF program. The agreement outlines the necessary reforms in the power sector, import restrictions, exchange rate practices, inflation control, and governance of state-owned enterprises. Pakistan is encouraged to secure additional financial support and implement the spending framework for pledged assistance. The IMF emphasizes the importance of executing the revised budget, resisting unbudgeted spending, and maintaining fiscal discipline.

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Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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