The International Monetary Fund (IMF) has approved a $700 million disbursement to Pakistan, lauding the nation’s progress in stabilizing its economy despite ongoing challenges, the agency said on Thursday. This significant milestone marks the 9-month Stand-By Arrangement (SBA) program agreed upon in July 2023, providing much-needed financial support while urging continued commitment to reforms.
Encouraging Economic Performance
The IMF’s decision comes after a thorough review of Pakistan’s economic performance, which showcased encouraging signs:
- Growth on the horizon: While FY24 growth is expected to reach 2%, a more robust expansion is anticipated in the second half.
- Fiscal improvement: Strict spending discipline and strong revenue collection achieved a primary surplus of 0.4% of GDP in the first quarter of FY24.
- Rising reserves: Gross reserves nearly doubled, climbing from $4.5 billion in June to $8.2 billion in December 2023.
- Exchange rate stability: The Pakistani rupee has remained broadly stable despite external pressures.
Areas for Continued Focus
However, the IMF also highlighted areas requiring continued focus:
- Sustaining fiscal discipline: Maintaining spending control and broadening revenue collection, particularly from non-filers and under-taxed sectors, is crucial to secure debt sustainability and facilitate social spending.
- Taming inflation: While expected to fall to 18.5% by June 2024, elevated inflation remains a concern, necessitating a tight monetary policy stance.
- Energy sector reforms: Regular price adjustments and continued cost-side reforms are vital for the sector’s viability and fiscal stability.
- Structural reforms: Fostering job creation and inclusive growth requires further progress on business environment improvements, SOE reform, climate resilience, and anti-corruption measures.
“Pakistan’s progress has been significant, but continued strong ownership of reforms remains critical,” stated Antoinette Sayeh, Deputy Managing Director and Chair of the IMF Executive Board. “Building fiscal space, taming inflation, and deepening structural reforms are key to securing longer-term stability and growth.”
The IMF’s endorsement and renewed financial support provide a vital boost to Pakistan’s continued economic recovery. However, the government faces the critical task of balancing fiscal prudence, tackling inflation, and implementing essential reforms to secure a brighter future for its people.
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