IMF Executive Board Approves US$3 billion Stand-By Arrangement for Pakistan
IMF News, July 12, 2023
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- Published: July 12, 2023
Program approval and financing
- Executive Board approved a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of SDR2,250 million (about $3 billion, or 111 percent of quota).
- The Fund’s immediate disbursement will be SDR894 million (or about US$1.2 billion).
- The remaining amount will be phased over the program's duration, subject to two quarterly reviews.
Economic context and program objectives
- Context:
- A difficult external environment, devastating floods, and policy missteps led to large fiscal and external deficits, rising inflation, and eroded reserve buffers in FY23.
- Program aims:
- Support immediate efforts to stabilize the economy and guard against shocks while creating space for social and development spending.
- Provide a policy anchor for addressing domestic and external imbalances and a framework for financial support from multilateral and bilateral partners.
Key policy measures and conditionality
- Fiscal policy:
- Implementation of the FY24 budget to facilitate Pakistan’s needed fiscal adjustment and ensure debt sustainability, while protecting critical social spending.
- The FY24 budget targets a modest primary surplus; anticipated improvement in tax revenues is critical.
- Maintain discipline over non-critical primary expenditure.
- Strengthen energy sector viability by aligning tariffs with costs, reforming the sector’s cost base, and better-targeting power subsidies.
- Enhance efforts to expand the tax base and improve public financial management, including in the delivery of quality infrastructure, to increase progressivity and efficiency.
- Monetary and exchange rate policy:
- Return to a market-determined exchange rate and proper FX market functioning to absorb external shocks and eliminate FX shortages.
- An appropriately tight monetary policy aimed at disinflation; continuation of a tight, proactive, and data-driven monetary policy is warranted.
- Close oversight of the banking system and decisive action to address undercapitalized financial institutions to support financial stability.
- Structural reforms:
- Further progress on structural reforms, particularly regarding energy sector viability, SOE governance, climate resilience, safety nets, and the business environment to promote job creation and inclusive growth.
Managing risks and implementation
- Steadfast policy implementation is critical for the success of the program; this requires greater fiscal discipline, a market-determined exchange rate, and progress on reforms related to the energy sector, climate resilience, and the business climate.
- Program disbursements are conditional on quarterly reviews to assess implementation and progress.
Selected economic indicators, FY2022–FY2024 (as presented)
- Population: 231.6 million (2022/23)
- Per capita GDP: US$1,642 (FY2022)
- Quota: SDR 2,031 million
- Poverty rate: 21.9 percent
- Main exports: Textiles (US$19.3 billion, FY2022) (national line; FY2019)
- Key export markets: European Union, United States, UAE
- Output and prices (% change)
- Real GDP at factor cost: 6.1 (FY2022), -0.5 (FY2023), 2.5 (FY2024 Proj.)
- Employment (%)
- Unemployment rate: 6.2 (FY2022), 8.5 (FY2023), 8.0 (FY2024)
- Prices (%)
- Consumer prices, period average: 12.1 (FY2022), 29.6 (FY2023), 25.9 (FY2024)
- Consumer prices, end of period: 21.3 (FY2022), 34.0 (FY2023), 16.2 (FY2024)
- General government finances (% GDP)
- Revenue and grants: 11.4 (FY2022), 12.3 (FY2023)
- Expenditure: 20.0 (FY2022), 18.9 (FY2023), 19.8 (FY2024)
- Budget balance, including grants: -7.8 (FY2022), -7.6 (FY2023), -7.5 (FY2024)
- Budget balance, excluding grants: -7.9 (FY2022)
- Primary balance, excluding grants: -3.1 (FY2022), -1.0 (FY2023), 0.4 (FY2024)
- Underlying primary balance (excluding grants) 2/: -2.3 (FY2022), -0.8 (FY2023)
- Total general government debt excl. IMF obligations: 74.0 (FY2022), 74.9 (FY2023), 68.4 (FY2024)
- External general government debt: 27.4 (FY2022), 31.1 (FY2023), 28.4 (FY2024)
- Domestic general government debt: 46.6 (FY2022), 43.8 (FY2023), 40.0 (FY2024)
- General government debt incl. IMF obligations: 76.1 (FY2022), 77.4 (FY2023), 70.9 (FY2024)
- General government and government guaranteed debt incl. IMF: 80.6 (FY2022), 81.8 (FY2023)
- Monetary and credit (% change, unless otherwise indicated)
- Broad money: 13.6 (FY2022), 13.3 (FY2023), 14.5 (FY2024)
- Private credit: 21.1 (FY2022), 1.0 (FY2023)
- Six-month treasury bill rate (%) 3/: 12.6 (FY2022)
- Balance of Payments (% GDP, unless otherwise indicated)
- Current account balance: -4.6 (FY2022), -1.2 (FY2023), -1.8 (FY2024)
- Foreign direct investment: 0.5 (FY2022), 0.2 (FY2023)
- Gross reserves (millions of U.S. dollars) 4/: 9,821 (FY2022), 4,056 (FY2023), 8,982 (FY2024)
- Months of next year's imports of goods and services: 1.9 (FY2022), 0.7 (FY2023), 1.4 (FY2024)
- Total external debt: 32.1 (FY2022), 36.4 (FY2023), 37.3 (FY2024)
- Exchange rate (% change)
- Real effective exchange rate: -6.0 (FY2022)
- Notes included in source:
- 1/ Fiscal year ends June 30.
- 2/ Excludes one-off transactions, including asset sales. In FY 2022 it excludes IPPs related arrears clearance and COVID-19 spending.
- 3/ Period average.
- 4/ Excluding gold and foreign currency deposits of commercial banks held with the State Bank of Pakistan.
Source: IMF press release "IMF Executive Board Approves US$3 billion Stand-By Arrangement for Pakistan", July 12, 2023.