Porter Highlights Challenges to Pakistan’s Economic Growth.
IMF Reaches Staff-Level Agreement with Pakistan on Final Review of $3 Billion SBA. Pakistan and the International Monetary Fund (IMF) have achieved a significant milestone with a staff-level agreement reached on the second and final review under the Stand-By Arrangement (SBA). This agreement paves the way for the disbursement of the last tranche of $1.1 billion from the IMF.
Nathan Porter, the head of the IMF team that conducted talks in Islamabad from March 14-19, announced the agreement, highlighting Pakistan’s improving economic and financial position since the first review. He attributed this progress to prudent policy management and the resumption of inflows from multilateral and bilateral partners.
However, Porter cautioned that economic growth would remain modest in the current financial year, as inflation levels are still above target. He emphasized the importance of implementing ongoing policies and reforms to address Pakistan’s economic vulnerabilities amidst challenges posed by external and domestic financing needs and an uncertain external environment.
Regarding the newly formed government led by Shehbaz Sharif, the IMF team expressed confidence in the government’s commitment to continue the policy efforts initiated under the SBA. The government aims to achieve the FY24 general government primary balance target and broaden the tax base while ensuring timely implementation of power and gas tariff adjustments to prevent circular debt accumulation.
Porter also highlighted Pakistan’s central bank’s commitment to maintaining prudent monetary policy to lower inflation and ensure exchange rate flexibility. He mentioned Pakistan’s interest in a successor medium-term Fund-supported program to address fiscal and external sustainability weaknesses and promote economic recovery and inclusive growth.
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The proposed program focuses on strengthening public finances, restoring the energy sector’s viability, controlling inflation, and promoting private-led activity. These measures aim to improve debt sustainability, enhance the energy sector’s performance, stabilize inflation, and foster resilient and inclusive economic growth.
The agreement marks a significant step forward in Pakistan’s efforts to stabilize its economy and pave the way for sustainable growth and development.
