## Press Release: IMF Executive Board Approves US$7.6 Billion Stand-By Arrangement for Pakistan

_IMF News, November 24, 2008_

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**Canonical URL:** [Press Release: IMF Executive Board Approves US$7.6 Billion Stand-By Arrangement for Pakistan](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr08303)

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## Bibliographic details
- Published: November 24, 2008

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### IMF arrangement approval and financing terms
- The Executive Board approved a 23-month Stand-By Arrangement for Pakistan equivalent to SDR 5.169 billion (about US$7.6 billion).
- Upon Board approval, SDR 2.067 billion (about US$3.1 billion) becomes immediately available to Pakistan; the remaining amount will be phased in, subject to quarterly reviews.
- The total IMF resources made available under the arrangement equal 500 percent of the country's quota.
- The arrangement was approved under the Fund's fast-track Emergency Financing Mechanism procedures.

### Program objectives and overarching strategy
- Two key objectives:
  - Restore macroeconomic stability and confidence through a tightening of macroeconomic policies.
  - Ensure social stability and adequate support for the poor and vulnerable in Pakistan.
- The program seeks to achieve these interrelated objectives by combining fiscal consolidation, tighter monetary policy, and strengthened social assistance.

### Fiscal policy measures and targets
- The program targets a significant reduction in the fiscal deficit:
  - Fiscal deficit will be reduced from 7.4 percent of GDP in 2007/2008 (July-June) to 4.2 percent in 2008/2009 and 3.3 percent in 2009/2010.
- Primary fiscal stance:
  - Primary balance targeted at 0.6 (2008/2009) and 1.6 (2009/2010) percent of GDP as shown in the program summary table.
- Main fiscal measures to achieve the adjustment:
  - Phasing out energy subsidies.
  - Better prioritizing development spending.
  - Implementing strong tax policy and tax administration reforms.
- Central bank financing of the government will be eliminated.

### Monetary policy, exchange rate, and banking-sector measures
- Monetary tightening to bring down inflation and strengthen international reserves.
- The State Bank of Pakistan recently increased its discount rate by 200 basis points to 15 percent, and stands ready to further tighten monetary conditions as needed.
- Structural actions include:
  - Designing contingency plans to address problem banks.
  - Measures to improve monetary management.
  - Strengthening the SBP's bank resolution capacity.
- Exchange rate policy:
  - Pursue a flexible exchange rate policy, with intervention in the foreign exchange market geared toward achieving reserve targets and smoothing excessive exchange rate volatility.

### Social protection and external support
- Strengthening and better targeting of social assistance is essential.
- Social safety net spending will be increased by 0.6 percentage point of GDP, to 0.9 percent of GDP in 2008/2009.
- Authorities plan to put in place a comprehensive and effectively-targeted social safety net in close cooperation with the World Bank.
- The IMF's financial support is intended to signal improved macroeconomic prospects and help mobilize additional donor financial support to consolidate reserves and finance the expanded social safety net.
- The program allows for additional development spending if external assistance is higher than projected.

### Recent economic developments (Annex summary)
- Macroeconomic deterioration since mid-2007 driven by:
  - Adverse security developments.
  - Large exogenous price shocks, notably increases in oil and food import prices.
  - Global financial turmoil.
  - Policy inaction during the political transition and large central bank financing of the fiscal deficit.
- Consequences observed:
  - Slower growth.
  - Higher inflation.
  - Sharp deterioration of the external position.
- Authorities requested IMF financial assistance to restore macroeconomic stability while protecting the poor and vulnerable.

### Key macroeconomic indicators (2004/05–2009/10) — selected entries from Pakistan: Main Economic Indicators, 2004/05-2009/10 1/
- Real GDP (change in percent):
  - 2004/05: 9.0
  - 2005/06: 5.8
  - 2006/07: 6.8
  - 2007/08: 3.4
  - 2008/09 (Proj.): 5.0
- CPI (average):
  - 2004/05: 9.3
  - 2005/06: 7.9
  - 2006/07: 7.8
  - 2007/08: 12.0
  - 2008/09 (Proj.): 23.0
  - 2009/10 (Proj.): 13.0
- CPI (end year):
  - 2004/05: 8.7
  - 2005/06: 7.6
  - 2006/07: 7.0
  - 2007/08: 21.5
  - 2008/09 (Proj.): 20.0
  - 2009/10 (Proj.): 6.0
- Gross national saving (percent of GDP):
  - 2004/05: 17.7
  - 2005/06: 17.8
  - 2006/07: 18.2
  - 2007/08: 12.9
  - 2008/09 (Proj.): 13.5
  - 2009/10 (Proj.): 15.7
- Gross capital formation (percent of GDP):
  - 2004/05: 19.1
  - 2005/06: 21.7
  - 2006/07: 21.3
- General government (percent of GDP) — selected rows:
  - Overall balance (excluding grants):
    - 2004/05: -3.3
    - 2005/06: -4.3
    - 2006/07: -7.4
    - 2008/09 (Proj.): -4.2
  - Primary balance:
    - 2004/05: 0.2
    - 2005/06: -0.6
    - 2006/07: -2.5
    - 2008/09 (Proj.): 0.6
    - 2009/10 (Proj.): 1.6
  - Debt:
    - 2004/05: 61.2
    - 2005/06: 55.8
    - 2006/07: 54.1
    - 2007/08: 57.9
    - 2008/09 (Proj.): 54.6
    - 2009/10 (Proj.): 52.4
- Money and credit (end-of-period, percent change):
  - M2:
    - 2004/05: 19.3
    - 2005/06: 14.9
    - 2006/07: 15.3
    - 2007/08: 10.8
    - 2008/09 (Proj.): 15.9
  - Credit to non-government:
    - 2004/05: 33.2
    - 2005/06: 23.2
    - 2006/07: 17.2
    - 2007/08: 16.4
    - 2008/09 (Proj.): 25.2
    - 2009/10 (Proj.): 19.5
- Interest rates (percent) — Six-month treasury bill rate (average, in percent):
  - 2004/05: 4.7
  - 2005/06: 8.2
  - 2006/07: 8.8
  - 2007/08: 11.0
- Balance of payments:
  - Current account (in percent of GDP):
    - 2004/05: -1.4
    - 2005/06: -3.9
    - 2006/07: -4.8
    - 2007/08: -8.4
    - 2008/09 (Proj.): -6.5
    - 2009/10 (Proj.): -5.7
  - External debt (in percent of GDP):
    - 2004/05: 31.3
    - 2005/06: 28.0
    - 2006/07: 26.9
    - 2007/08: 26.5
    - 2008/09 (Proj.): 31.4
- Reserves (in millions of U.S. dollars) 2/:
  - 2004/05: 9,805
  - 2005/06: 10,765
  - 2006/07: 14,302
  - 2007/08: 8,591
  - 2008/09 (Proj.): 11,291
- Exchange regime: Managed float
- Present rate (November 21, 2008): PRs 79.3 = US$ 1
- Real effective rate, CPI basis (annual average, 2000=100):
  - 2004/05: 5.3
  - 2005/06: 0.5
  - 2006/07: -0.8
- Quota at the Fund: SDR 1,033.7 million

*Press Release No. 08/303 (November 24, 2008).*

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## References

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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr08303_