Pakistan, IMF reach staff-level agreement on first bailout review

In June, the IMF executive board had approved the much-needed nine-month standby arrangement (SBA) with Pakistan “to support its economic stabilisation programme”. The approval had allowed for an immediate disbursement of $1.2bn, with the rest to be phased over the programme’s duration — subject to two quarterly reviews.

The IMF’s technical staff had initiated the first evaluation of the short-term loan agreement on Nov 2, which concluded on Nov 10.

In a statement, the Fund said that a team led by Nathan Porter was in Islamabad to hold discussions on the first review of the Stand-By Arrangement (SBA).

“The IMF team has reached a staff-level agreement with the Pakistani authorities on the first review of their stabilisation programme supported by the IMF’s $3 billion SBA,” Porter said.

“The agreement is subject to approval of the IMF’s Executive Board. Upon approval, around $700m will become available bringing total disbursements under the programme to almost $1.9bn,” he said.

“Anchored by the stabilisation policies under the SBA, a nascent recovery is underway, buoyed by international partners’ support and signs of improved confidence,” Porter said.

He said that the steadfast execution of the FY24 budget, continued adjustment of energy prices, and renewed flows into the foreign exchange market had lessened fiscal and external pressures.

“Inflation is expected to decline over the coming months amid receding supply constraints and modest demand. However, Pakistan remains susceptible to significant external risks, including the intensification of geopolitical tensions, resurgent commodity prices, and the further tightening in global financial conditions. Efforts to build resilience need to continue,” Porter said.

The IMF mission chief said that strengthening macroeconomic sustainability and laying the conditions for balanced growth were key priorities under the SBA.

The statement by the IMF was released hours after Porter and IMF Resident Representative for Pakistan Esther Perez Tuiz called on interim Prime Minister Anwaarul Haq Kakar.

A statement issued by the Prime Minister’s Office said the two apprised Kakar about the “status of the negotiations held at the technical levels with the team of government of Pakistan under the first review of the SBA”.

According to the PMO, Porter acknowledged the efforts made by the government in meeting the various quarterly targets. Porter said that the efforts had resulted in the “positive conclusion of the technical-level talks”. He said that both teams had extensive talks on various aspects of the SBA.

Porter also appreciated the role played by interim Finance Minister Shamshad Akhtar and her team and SBP Governor Jameel Ahmed in the talks.

PM Kakar thanked the IMF team for its ongoing work with Pakistan and praised the finance minister’s leadership and the contribution of her team in taking the programme forward. He also appreciated the role of the SBP governor.

“The prime minister reaffirmed the government’s enduring commitment to the reform efforts agreed with the IMF as these are aimed at stabilising Pakistan’s economy in the long run,” the statement reads.

It added that Akhtar, Ahmed, Federal Board of Revenue Chairman Malik Amjad Zubair Tiwana and senior government officials also attended the meeting.

‘Pakistani authorities deserve credit’

Earlier today, IMF Managing Director Kristalina Georgieva had said the agreement for the release of the second tranche was expected this week.

Speaking to Bloomberg, Georgieva said: “The Pakistani authorities, especially the finance minister deserve credit for a very difficult time sticking to the programme that they have.”

When questioned about the obstacle affecting the release of the tranche, she pointed to the predominant issue in the country as “tax collection”.

“The country today collects 12 per cent tax-to-GDP. We are saying it has to be at least 15pc to help the revenues to sustain the functioning of your economy.”

Georgieva recommended to the government, stating, “For the people in Pakistan that can pay taxes, collect it from them.”

Meanwhile, Senator Raza Rabbani strongly condemned the global lender’s recent communication with Pakistan’s key partners over fund pledges.

With policy-level discussions boiling down primarily to the external financing gap, the visiting staff mission of the IMF had started direct communications with key bilateral partners to confirm their committed support to Pakistan, including rollovers and additional flows, during the current fiscal year.

In a statement issued today, Rabbani said it was a “matter of deep shame and regret that the credibility of the caretaker government has dropped to a level where the local IMF staff is cross-checking and seeking assurances from ambassadors of countries that have pledged to help Pakistan”.

“The IMF Pakistan staff had no right to call on the UAE Ambassador,” he stated, adding that the global lender was treating Pakistan like a “client state that is not to be trusted”.

“The IMF staff in Pakistan have no business to meet Ambassadors accredited to Islamabad and check on commitments between two sovereign states,” Rabbani said in the statement.

He also demanded that the interim government should bring details of its meeting with the fund before the Senate.