Islamabad is also seeking another long-term bailout.
Islamabad:
The International Monetary Fund (IMF) said on Wednesday it had reached a staff-level agreement with Pakistan that, if approved by its board of directors, would allocate $1.1 billion to the heavily indebted South Asian economy, which is also facing a balance of payments crisis.
The funds are the final part of a $3 billion last-ditch bailout package Pakistan secured last summer to avert a sovereign debt default. Islamabad is also seeking another long-term bailout.
“The IMF team has reached staff-level agreement with the Pakistani authorities on the second and final review of the Pakistan Stabilization Plan,” the IMF said in a statement.
“The agreement is subject to approval by the IMF’s Executive Board,” it added. The agreement is set to expire on April 11, and while Pakistan has not yet been added to the IMF’s executive board’s agenda, officials said the board is expected to approve it sometime in April.
The agreement follows five days of talks between an IMF mission and Pakistani officials to review fiscal consolidation benchmarks set for the loan.
The IMF said: “Pakistan’s economic and financial conditions have improved in the months since the first review, with economic growth and growth supported by prudent policy management and resumption of financial inflows from multilateral and bilateral partners. Confidence continues to return.”
However, growth is expected to be moderate this year and inflation remains well above target, as Pakistan needs more policy reforms to address its “economic vulnerabilities,” the bank added.
Most Pakistani dollar bonds traded higher on Wednesday.
Bonds due in 2027 were up 0.25 cents on the dollar at 83.957 cents, while bonds due in 2025 were up 0.21 cents on the dollar at 92.023 cents.
new agreement
Pakistan’s newly appointed finance minister Mohammad Aurangzeb has said Islamabad will seek another long-term bailout, and the International Monetary Fund said Pakistan has expressed interest in reaching a deal during review talks and is expected to launch a medium-term plan in the next few years. Discussed for months.
The government has not formally stated the size of the additional funding it is seeking. Bloomberg reported in February that Pakistan planned to apply for at least $6 billion in loans.
Before the standby arrangement, Pakistan must meet IMF conditions, including budget revisions, higher interest rates and revenue generation through increased taxes and higher electricity and gas prices.
The IMF said the newly elected government of Prime Minister Shehbaz Sharif was committed to the measures and called for broadening the tax base and adjusting electricity and gas tariffs.
Economist Sakib Sheerani said a new long-term deal could trigger more conditions from the International Monetary Fund.
“While the successful completion of the SBA improves the country’s chances of accessing subsequent programs, the next arrangement is likely to be significantly different from the current one – focusing more on deeper structural conditions, such as the Public Sector Wage and Pensions Act, “He said.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
