IMF Approves $7 Billion EFF Program for Pakistan

APP

Islamabad: The International Monetary Fund (IMF) board has approved a 37-month Extended Fund Facility (EFF) program for Pakistan, totaling $7 billion, with the immediate release of approximately $1 billion as the first tranche.

A staff-level agreement between Pakistan and the IMF was reached in July. According to an IMF press release, this new program will necessitate sound policies and reforms to bolster the government’s ongoing efforts to strengthen macroeconomic stability, tackle deep structural challenges, and foster conditions for stronger, more inclusive, and resilient growth.

The IMF emphasized that continued financial support from Pakistan’s development and bilateral partners will be crucial for achieving the program’s objectives.

The statement noted that Pakistan has made significant strides toward restoring economic stability, thanks to consistent policy implementation under the 2023-24 Stand-By Arrangement (SBA).

Growth has rebounded to 2.4 percent in FY24, driven by agricultural activity, while inflation has decreased significantly to single digits, aided by tight fiscal and monetary policies.

A stable current account and calm foreign exchange market conditions have allowed for the rebuilding of reserve buffers. Reflecting this disinflation and improved domestic and external conditions, the State Bank of Pakistan has reduced the policy rate by a total of 450 basis points since June, supported by a prudent FY25 budget.

However, the IMF cautioned that Pakistan’s vulnerabilities and structural challenges remain significant. In light of the progress made under the 2023 SBA, the government is now focusing on renewed efforts to address these challenges, build resilience, and enable sustainable growth.

Key priorities under the new EFF-supported program include:

1. Rebuilding policy credibility and ensuring macroeconomic sustainability through consistent implementation of sound macro policies and an expanded tax base.
2. Advancing reforms to strengthen competition and enhance productivity and competitiveness.
3. Reforming state-owned enterprises (SOEs) and improving public service provision and energy sector viability.
4. Building climate resilience.

In a recent virtual address at the “High-Level Private Sector Dialogue – CPEC-II and the Region,” Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb emphasized Pakistan’s commitment to undertaking structural reforms under the IMF program.

He reiterated the necessity of maintaining the reform agenda in areas such as taxation, the energy sector, state-owned enterprises, and privatization, stating, “We will stay on the course.”