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Pakistan has reached a staff-level agreement with the International Monetary Fund that would help South Asian country to get an additional $1.2 billion in loans and unlock more funding.
The IMF will also consider an extension of the facility to end-June 2023, the world lender said in a statement. The agreement will make additional funds available once the IMF executive board approves, taking the extended loan facility with Pakistan to about $7 billion.
According to economists, funds from the IMF will help Pakistan avert a potential default, and pave the way for more aid from other multilateral institutions and friendly nations like Saudi Arabia . Pakistan needs at least $41 billion in the next 12 months to repay debt and fund imports as foreign-exchange reserves shrink to a level that could only cover less than two months of imports.
To win IMF’s accord, Pakistan has raised electricity tariffs and almost doubled diesel prices over the past two months even as inflation has accelerated to 20 percent, first time over last 13 years.
The $1.2 billion disbursement is expected in August after the IMF’s management gives final approval, according to media reports.
Among the policy priorities set by IMF for implemetation for Pakistan are:
Enabling a proactive monetary policy to slow inflation to 5%-7% over the medium term and greater exchange rate flexibility to rebuild reserves
Targeting an underlying primary surplus of 0.4% of gross domestic product by restraining spending and boosting revenue
Resuming reforms including timely adjustment of power tariffReducing poverty levels, strengthening governance and social safety
Meanwhile, the IMF announcement regarding the agreement was welcomed by the stock market with KSE-100 rising by over 500 points on Thursday. Pak rupee also got stronger vis-a-vis greenback.
