Pakistan is on the verge of securing $710 million in funding from the International Monetary Fund (IMF). Economic experts are confident that this financial boost is imminent due to Pakistan’s substantial progress in meeting the fiscal and monetary targets set in their agreement with the IMF. The IMF is slated to review Pakistan’s financial performance at the beginning of next month, under a $3 billion loan program.
This positive development follows the approval of a nine-month standby arrangement by the IMF for Pakistan in July, amounting to $3 billion. The initial disbursement of $1.2 billion from this arrangement was a much-needed lifeline for Pakistan, which was grappling with a severe external financing gap that threatened sovereign debt default.
Dr. Khaqan Hassan Najeeb, a seasoned economist and former government economic adviser, expressed optimism regarding the upcoming IMF review. He noted that the review would encompass various aspects of Pakistan’s economic performance, including indicative targets, quantitative performance criteria, and structural benchmarks for the first quarter. “One can be hopeful since the targets on the fiscal side, especially the primary surplus, the targets on the energy side, especially the circular debt, and other targets on the monetary side and net international reserves are all within the bounds that were agreed with the Fund,” he stated.
While the progress is encouraging, Dr. Najeeb acknowledged that the government still faces challenges, particularly regarding slower-than-expected external inflows and the necessity of meeting upcoming quarter targets. He emphasised the significance of the IMF review in ensuring Pakistan’s continued access to external funds and macroeconomic stability.
Khurram Husain, a senior economic analyst, raised concerns that the IMF might scrutinise the government’s fiscal numbers during the review. Delays in raising gas prices and the artificial maintenance of the exchange rate were cited as potential points of contention. Husain noted that these factors could impact Pakistan’s fiscal performance, adding that “the economy is currently under stress, and this will take time to improve.”
On a more positive note, Ali Khizer, another senior economist, highlighted that the government had successfully met all quantitative targets set by the IMF, including tax collection. He pointed out that the fiscal primary surplus for the first quarter was significantly higher than the target, standing at Rs417 billion compared to the expected Rs87 billion. Khizer expressed confidence that Pakistan would easily clear the upcoming IMF review, thanks to the concerted efforts and measures taken, including a substantial increase in gas prices.
In conclusion, Pakistan’s progress in meeting its fiscal and monetary targets has set the stage for a favourable IMF review, which could lead to the approval of a $710 million loan tranche in December. While challenges remain, including slower external inflows and economic stress, the nation’s commitment to meeting the IMF’s requirements appears to be paying off.