By: Vibhuti Pathak
PM Shehbaz Sharif attended the World Economic Forum in Riyadh where he discussed a new loan programme with IMF Managing Kritalina Georgieva. The IMF also appreciated Pakistan’s policy and fiscal measures to achieve the targets under the standby arrangement. The Finance Minister has not disclosed the actual amount government is seeking, has given hopes to secure a staff-level agreement on the new program by early July.
“The disbursement will bring more economic stability in Pakistan,” Sharif said in a statement from his office, adding that the standby arrangement was important in saving the South Asian nation from defaulting on its external liabilities.
The funding was the second and final tranche of Pakistan’s £2.3 billion standby arrangement with the IMF which it secured last summer to help avert a sovereign default.
The fiscal position continued to strengthen with a primary surplus of 1.8 per cent of GDP achieved in the first half of the fiscal year, on track to achieve a primary surplus of 0.4 per cent of GDP.
“Macroeconomic conditions have improved over the course of the program,” it said in a statement, adding that 2 per cent growth was expected in the current fiscal year ending on June 30, given continued recovery in the second half.
The government is seeking a new, larger long-term Extended Fund Facility (EFF) agreement with the IMF. The Finance Minister Muhammad Aurangzeb said the government will secure a staff-level agreement on the new programme by early July.
The aim of acquiring this loan is to help achieve macroeconomic stability and execute long-overdue and painful structural reforms. Although Aurangzeb has declined to share the amount the government is seeking. The formal request is yet pending but the Fund and the government are already in discussions. If secured, it would be Pakistan’s 24th IMF bailout.
The £278 billion economy faces a chronic balance of payments crisis, with nearly £19 billion to repay in debt and interest over the next fiscal year – three times more than its central bank’s foreign currency reserves.
Pakistan’s finance ministry expects the economy to grow by 2.6 per cent in the fiscal year ending in June, while average inflation for the year is projected to stand at 24 per cent, down from 29.2 per cent the previous fiscal year.
The IMF said the inflation, while still elevated, continued to decline, and, with appropriately tight, data-driven monetary policy maintained, was expected to reach around 20 per cent by end-June.
To move Pakistan from stabilisation to a strong and sustainable recovery, authorities need to continue their policy and reform efforts, it added.
