Washington: The International Monetary Fund (IMF) on Wednesday announced that it has reached a staff-level agreement with cash-strapped Pakistan for the release of $1.1 billion tranche, the last of the $3 billion financial bailout package, as the global moneylender noted that Pakistan's inflation was above target and economic growth remained modest, reported the Express Tribune.
The IMF Executive Board had approved the $3 billion Stand-By Arrangement (SBA) for Pakistan last year. An IMF team, led by Nathan Porter, visited Islamabad from March 14-19 to hold discussions on the second review of Pakistan’s economic programme supported by an IMF. “The IMF team has reached a staff-level agreement with the Pakistani authorities on the second and final review of Pakistan’s stabilization program supported by the IMF’s $3 billion (SDR2,250 million) SBA," the lender said.
“The agreement recognises the strong programme implementation by the State Bank of Pakistan and the caretaker government in recent months, as well as the new government’s intentions for ongoing policy and reform efforts to move Pakistan from stabilisation to a strong and sustainable recovery," the IMF said in a statement.
Pakistan's economic growth to be modest
Although Pakistan has shown improvement in certain areas, the global moneylender underscored that the country's growth remains modest and inflation was above target. The IMF said Pakistan will further increase gas and electricity prices to keep circular debt at the agreed level during the current fiscal year. The monetary fund also announced that Pakistan has shown interest in taking a new medium-term bailout package and discussions will begin in the coming months.
The IMF further stated that ongoing policy and reform efforts are required to address Pakistan’s deep-seated economic vulnerabilities amidst the ongoing challenges posed by elevated external and domestic financing needs and an unsettled external environment. "The new government is committed to continuing the policy efforts that started under the current SBA to entrench economic and financial stability for the remainder of this year," it said.
The Pakistan government has 'assured' the International Monetary Fund (IMF) of expediting the privatisation programme and that the government has prepared a plan to privatise power-sharing companies. Pakistan's officials assured the international lender of jacking up the electricity tariff from July 1, while monthly, quarterly and yearly fuel adjustments will affect consumers for cost recovery.
Pakistan's economic problems
Pakistan continues to be enmeshed in an economic crisis with inflation remaining high, hovering around 30 per cent, and economic growth slowing to around 2 per cent. Meanwhile, the total debt burden on Pakistan has risen to a whopping 63,399 trillion Pakistani Rupees (PKR) by the end of November last year in the financial year 2023-24, according to a local report.
Pakistan's total debt increased by over PKR 12.430 trillion during the tenure of the PDM and the caretaker government. The overall debt burden surged to PKR 63.390 trillion including PKR 40.956 trillion in domestic loans and PKR 22.434 trillion in international loans.
Earlier, a World Bank report stated that Pakistan's economic development is limited to the elite which resulted in the country lagging behind its fellow countries in the wake of the economic crisis in Pakistan. World Bank Country Director for Pakistan, Najy Benhassine, noted that Pakistan's economic model has become "ineffective" and said that poverty has started to increase again, the sentiment is growing towards changing the policy and that economic development in Pakistan is not sustainable.
Last year, Pakistan formally requested fresh loans amounting to $600 million from its all-weather friend China, a critical step in its ongoing negotiations with the International Monetary Fund (IMF) for the release of the second tranche of a $3 billion bailout package. The Pakistani government is actively engaged in discussions with the Industrial and Commercial Bank of China (ICBC) and the Bank of China for the loans.
(with inputs from agencies)
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