IMF delves into reasons behind ‘shorter’ program with Pakistan

The International Monetary Fund (IMF) has said that the Recently Approved Stand-By Agreement with Pakistan is intended to support the country’s immediate effort to stabilize the economy and ensure that current balance of payments needs are met.

At a press conference on Thursday, Julie Kozack, the IMF’s Director of Strategic Communications (COM), said that while it is a relatively short program, the nine month SBA “It provides time for Pakistan to implement critical policies to strengthen its internal and external economic situation, thus supporting sustainability.”

“Solving Pakistan’s structural challenges will likely require continued reforms over the medium term to support necessary economic transformations, strengthen prospects for inclusive growth, and create an enabling environment for renewed private capital inflows,” Kozack responded when asked by a reporter if the nine countries month SBA would be enough to get Pakistan out of its current economic crisis.

Strong policy implementation is critical in the period ahead. This will be critical to the success of the program: Julie Kozack, IMF Director of Strategic Communications

Kozack reiterated that the IMF is “ready to work with Pakistan and its government in efforts to restore sustainability and economic stability.”

However, the senior IMF official also warned that policy implementation would remain key to the SBA’s success.

“Strong policy implementation is critical in the period ahead. This will be critical to the success of the program and of course ultimately to help and support the people of Pakistan.”

Kozack’s statement comes as the Pakistani government hailed the new SBA, seen by many as an upgrade to the now lapsed Extended Fund Facility.

While the previous unsuccessful ninth review would have seen an inflow of around $1.1 billion, Pakistan managed to secure a new nine-month program with a new outlay of $3 billion, subject to two further reviews, in November 2023 and February 2024.

Thursday, Pakistan’s central bank also received $1.2 billionthe first of three tranches from the IMF.

However, the new IMF deal also extends Pakistan’s commitment well into the second half of the 2023-24 fiscal year, raising questions about whether Islamabad, which would see a change of government at the time of the second review of the SBA, could continue the reform process committed to the lender.

Earlier this month, ahead of the IMF Executive Board meeting, the lender’s staff met with representatives of the main political parties in Pakistan to seek assurances of their support for the programme’s key objectives and policies ahead of the upcoming national elections.

Pakistan, currently in the midst of economic turmoil due to dollar shortages and runaway inflation, has seen a slight change in sentiment with Saudi Arabia, the United Arab Emirates and the IMF extending a helping hand along with Fitch Ratings also improves the country status of ‘CCC’ from ‘CCC-‘.

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