IMF-Pakistan deal: The International Monetary Fund (IMF) has reached a staff-level agreement with the cash-strapped Pakistan on a $3 billion agreement to bring back the country from total economic collapse.
According to a press release by the IMF, a Pakistan needs a "steadfast policy implementation" to overcome its ongoing challenges, including a greater fiscal discipline, a market determined exchange rate to tackle external pressures and further progress on reforms.
The long-awaited nine-month 'stand-by arrangement', comprising 111 per cent of Pakistan's IMF quota, was announced by Nathan Porter, IMF Mission Chief to Pakistan, in a statement on Thursday.
"Since the completion of the combined seventh and eight reviews under the 2019 Extended Fund Facility (EFF) in August 2022, the economy has faced several external shocks such as the catastrophic floods in 2022 that impacted the lives of millions of Pakistanis and an international commodity price spike in the wake of Russia’s war in Ukraine," said Porter.
Porter also highlighted policy missteps in Pakistan, such as "shortages from constraints on the functioning of the FX market", that have stalled the country's economic growth.
"Inflation, including for essential items, is very high. Despite the authorities’ efforts to reduce imports and the trade deficit, reserves have declined to very low levels. Liquidity conditions in the power sector also remain acute, with further buildup of arrears (circular debt) and frequent loadshedding," he added.
Pakistan on the brink of economic collapse
The past few days have seen desperate efforts from the Pakistan government to secure a bailout package from the IMF to save it from an economic collapse. As per the Pakistani government, Pakistan Prime Minister Shehbaz Sharif spoke with Kristalina Georgieva, the managing director of the IMF on Tuesday, where he pleaded for urgent disbursement of funds.
Discussions between the international money lender and Pakistan were stalled in December last year after the former delayed the release of a crucial tranche of $1.1 billion from the bailout.
Pakistan and the IMF have been at odds over what the fund says is Islamabad’s unsatisfactory compliance with the bailout conditions. Pakistan claims it has fully complied with the conditions.
The country has been desperately struggling to avoid a default with financial help from friendly countries such as China, Saudi Arabia and the United Arab Emirates. It has also been embroiled in an unprecedented economic crisis since Sharif replaced Imran Khan, who was ousted in a no-confidence vote in the parliament last year.
Economic recovery has also been hindered by floods last summer that killed 1,739 people and caused $30 billion in damage. Pakistanis have been facing record-high monthly inflation since January, partly owing to the Russia-Ukraine war.
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