Steadfast implementation of the Stand-By Arrangement (SBA) inked between Pakistan and the International Monetary Fund (IMF) is critical to address the country’s large financing needs and support its most vulnerable populations, spokesperson Julie Kozack said on Thursday.
“This will be critical for success of the program and, of course, ultimately, to aid and support the people of Pakistan,” the spokesperson told a press conference a day after the global lender’s Executive Board approved a nine-month $3 billion SBA to support the government’s economic stabilization program.
Kozack said the IMF had already disbursed $1.2 billion to Pakistan, adding the remainder would be released subject to two quarterly reviews in November and February. “The [SBA] is aimed at supporting the authorities’ immediate efforts to stabilize the economy and also to ensure that the current balance of payments need is filled,” she said, acknowledging that the bailout was a “relatively short program.”
However, she stressed, it would provide Pakistan time to implement policies critical to strengthening its domestic and external economic situation, thereby supporting sustainability. “Resolving Pakistan’s structural challenges will likely require continued reforms over the medium-term to underpin the needed economic transformations to strengthen inclusive growth prospects and to create an environment conducive to renewed private capital inflow,” she added.
“We at the IMF always stand ready to work with Pakistan and the Pakistani government on these efforts to restore sustainability and economic stability,” she stressed.
The IMF’s Executive Board approved the SBA after Pakistan’s last Extended Fund Facility with the global lender expired on June 30 without being completed. Prior to its expiry, the government had been attempting to secure its revival since November 2022, but differences over various policy measures—including but not limited to returning to a market-determined exchange rate and raising utility tariffs—prevented it from proceeding.
In a statement issued after the SBA’s approval, the IMF said it wanted Pakistan to strengthen its public finances, increase tax revenues, maintain discipline over non-critical primary expenditure, and reduce the energy sector’s circular debt. As part of this, the government has already announced plans to increase electricity prices and has also raised income taxes on all individuals earning over Rs. 200,000/month.
Pakistan is currently in the midst of economic turmoil, with skyrocketing inflation and critically low foreign exchange reserves that have plummeted the value of the rupee. In a bid to reduce the outflow of dollars, the government had imposed import restrictions that caused a severe decline in industrial output due to lack of raw materials, further denting the national economy and increasing unemployment.