Pakistan, IMF reach staff-level agreement on final review of USD 3 billion bailout

ISLAMABAD: The International Monetary Fund (IMF) reached a staff-level agreement with Pakistan on Wednesday, on the final review of a USD 3 billion bailout, paving the way for the nation to receive the last tranche of USD 1.1 billion after approval from the Fund's Executive Board, reported Dawn.

The funds are the final tranche of a USD 3 billion last-gasp rescue package that Pakistan secured last summer, which averted a sovereign debt default.

Reportedly, Islamabad is also seeking another long-term bailout, according to Dawn.

"The agreement recognises the strong program implementation by the State Bank of Pakistan and the caretaker government in recent months, as well as the new government's intentions for ongoing policy and reform efforts to move Pakistan from stabilisation to a strong and sustainable recovery," the Fund said in a statement.

"Given the timing of the Second Review mission, immediately following the formation of the new cabinet, we expect the review to be considered by the IMF's Board in late April," it added.

Nathan Porter, the IMF mission chief in Pakistan, said in a statement that Pakistan's economic and financial position has improved in the months since the first review.

"Pakistan's economic and financial position has improved in the months since the first review, with growth and confidence continuing to recover on the back of prudent policy management and the resumption of inflows from multilateral and bilateral partners," Porter stated.

However, he added that growth was "expected to be modest this year" and that inflation remained well above target, as reported by Dawn.

"Ongoing policy and reform efforts are required to address Pakistan's deep-seated economic vulnerabilities," he said, adding that the new government "is committed to continuing policy efforts."

The statement added that the current government will continue its "efforts towards broadening the tax base, and continue with the timely implementation of power and gas tariff adjustments to keep average tariffs consistent with cost recovery while protecting the vulnerable through the existing progressive tariff structures, thus avoiding any net circular debt accumulation."

It further emphasised that the central bank remained "committed to maintaining a prudent monetary policy to lower inflation and ensure exchange rate flexibility."

Following the statement, shares at the Pakistan Stock Exchange (PSX) climbed by 374 points, Dawn reported.

Earlier, Finance Minister Muhammad Aurangzeb and the IMF mission chief in Pakistan, Nathan Porter, led their respective teams at the final customary concluding session.

Both sides remained silent and did not say anything because of IMF communication protocols.

Last year, the IMF Executive Board approved the nine-month arrangement with Pakistan to support its economic stabilisation programme.

The approval had allowed for an immediate disbursement of USD 1.2 billion, with the rest to be phased over the programme's duration, subject to two quarterly reviews.

Earlier in November last year, a Staff-Level Agreement (SLA) was reached between the IMF staff and Pakistan regarding the first review under Pakistan's SBA.

Moreover, the agreement was contingent upon approval by the IMF's Executive Board, as reported by Dawn.

In January, the IMF released the USD 700 million tranche, shoring up the State Bank of Pakistan's (SBP) foreign reserves following a successful first review by the Executive Board of the IMF under the agreement.

In his first formal media interaction, newly elected Finance Minister Aurangzeb Khan indicated that Pakistan now eyes a "longer and larger" economic bailout package with the IMF.

Meanwhile, a spokesperson for the lender also confirmed that the IMF supported formulating a new economic programme for the country if the new government sought one.

Reportedly, the primary ministerial meetings are scheduled from April 17 to 19, followed by additional events and activities from April 15 to 20, according to Dawn.

Moreover, Pakistan has stated its intention to attend the meetings, with the new finance minister slated to lead the delegation.