IMF Executive Board Completes Second and Final Review of the Stand-By Arrangement for Pakistan
IMF News, April 29, 2024
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- IMF Executive Board Completes Second and Final Review of the Stand-By Arrangement for Pakistan
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- Published: April 29, 2024
Review outcome and disbursement
- The Executive Board completed the second and final review of Pakistan’s economic reform program under the IMF’s Stand‑By Arrangement (SBA).
- Immediate disbursement: SDR 828 million (around $1.1 billion).
- Total disbursements under the arrangement: SDR 2.250 billion (about $3 billion).
- Pakistan’s 9‑month SBA was approved by the Executive Board on July 12, 2023.
Program focus and objectives
- Program priorities included:
- Necessary fiscal adjustment and maintenance of debt sustainability via FY24 budget implementation.
- Protection of critical social spending.
- Buffering external shocks and eliminating FX shortages by returning to proper FX market functioning.
- Making progress on disinflation by maintaining a tight monetary policy.
- Furthering structural reforms focused on energy sector viability, SOE governance, and climate resilience.
- The SBA served as a policy anchor to address domestic and external imbalances and as a framework for financial support from multilateral and bilateral partners.
Macroeconomic developments and outlook
- Growth:
- Growth of 2 percent is expected in FY24 given continued recovery in the second half of the fiscal year.
- Fiscal performance:
- Primary surplus of 1.8 percent of GDP achieved in the first half of fiscal year 2024.
- On track to achieve end‑FY24 target primary surplus of 0.4 percent of GDP.
- Inflation:
- Inflation, while still elevated, continues to decline and is expected to reach around 20 percent by end‑June.
- With appropriately tight, data‑driven monetary policy maintained, inflation should return to the SBP’s target over the medium term.
- External position:
- Gross reserves increased to around $8 billion, up from $4.5 billion at the start of the program, and are projected to continue being rebuilt over the medium term.
- Continued improvements in FX market functioning and a market‑determined exchange rate are emphasized to buffer shocks and attract financing.
- Financial sector:
- Need for stronger action to address undercapitalized financial institutions and vigilance to ensure financial stability.
Policy recommendations and priorities (Antoinette Sayeh)
- Persevere beyond the current arrangement with sound macroeconomic policies and structural reforms to create stronger, inclusive, and sustainable growth.
- Continued external support will be critical.
- Fiscal policy:
- Continue revenue mobilization efforts and spending discipline at both federal and provincial levels to ensure primary surplus targets are achieved.
- Further mobilize revenues, especially from non‑filers and undertaxed sectors, and improve public financial management to secure fiscal sustainability and space for social and development spending beyond FY2024.
- Energy sector:
- Continue timely tariff adjustments and enhanced collection efforts.
- Undertake cost‑side reforms to address underlying issues and sector viability.
- Monetary and FX policy:
- Maintain the State Bank of Pakistan’s tight monetary policy stance until inflation returns to more moderate levels.
- Foster a market‑determined exchange rate to help buffer external shocks and support competitiveness and growth.
- Continue significant rebuilding of FX reserves.
- Structural reforms and social protection:
- Accelerate structural reforms and protect the most vulnerable through an adequately‑financed Benazir Income Support Program.
- Priorities include advancing SOE reform to ensure all SOEs fall under the new policy framework; strengthening governance and anti‑corruption institutions; and building climate resilience.
Key statistics and selected indicators
- Population: 231.6 million (2022/23)
- Per capita GDP: US$1,446.3 (FY2023)
- Quota: SDR 2,031 million
- Poverty rate: 21.9 percent
- Main exports: Textiles (US$16.5 billion, 2022/23)
- Key export markets: European Union, United States, UAE
- Table 1. Pakistan: Selected Economic Indicators, FY2023–FY2025 (selected series)
- Real GDP at factor cost: FY2023 -0.2; FY2024 2.0; FY2025 3.5
- Unemployment rate: FY2023 8.5; FY2024 8.0; FY2025 7.5
- Consumer prices, period average: FY2023 29.2; FY2024 24.8; FY2025 12.7
- Consumer prices, end of period: FY2023 29.4; FY2024 19.6; FY2025 9.5
- Revenue and grants (% GDP): FY2023 11.4; FY2024 12.5; FY2025 12.4
- Expenditure (% GDP): FY2023 19.2; FY2024 20.0; FY2025 19.8
- Budget balance, including grants (% GDP): FY2023 -7.8; FY2024 -7.4
- Primary balance, excluding grants (% GDP): FY2024 0.4
- Total general government debt excl. IMF obligations (% GDP): FY2023 74.7; FY2024 69.6; FY2025 68.1
- External general government debt (% GDP): FY2023 28.5; FY2024 26.2; FY2025 25.0
- Domestic general government debt (% GDP): FY2023 46.2; FY2024 43.3; FY2025 43.2
- General government debt incl. IMF obligations (% GDP): FY2023 77.1; FY2024 72.1; FY2025 70.0
- General government and government guaranteed debt incl. IMF (% GDP): FY2023 81.3; FY2024 76.0; FY2025 73.6
- Broad money (% change): FY2023 14.2; FY2024 13.5; FY2025 22.0
- Private credit (% change): FY2023 2.3; FY2025 (not listed for FY2024)
- Six‑month treasury bill rate (period average) (%): FY2023 18.3
- Current account balance (% GDP): FY2023 -0.7; FY2024 -1.2
- Foreign direct investment (% GDP): FY2023 0.5; FY2024 0.2; FY2025 0.3
- Gross reserves (millions of U.S. dollars): FY2023 4,455; FY2024 9,029; FY2025 13,364
- Months of next year's imports of goods and services: FY2023 0.8; FY2024 1.5; FY2025 2.1
- Total external debt (% GDP): FY2023 40.1; FY2024 36.6; FY2025 34.7
- Real effective exchange rate: FY2023 -8.0
IMF Press Release No. 24/130, April 29, 2024.