Pakistan, IMF reach staff-level agreement on 1st review of loan programme

Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement on the first review under Pakistan’s 37-month $7bn Extended Fund Facility (EFF) and on a new 28-month $1.3bn arrangement under the Resilience and Sustainability Facility (RSF), the federal government and the IMF confirmed.

“The IMF team has reached a staff-level agreement (SLA) with the Pakistani authorities on the first review of the 37-month Extended Arrangement under the Extended Fund Facility (EFF), and on a new 28-month arrangement under the IMF’s RSF with total access over the 28 months of around $1.3 billion (SDR 1 billion). The staff-level agreement is subject to approval of the IMF’s Executive Board. Upon approval, Pakistan will have access to about US$1.0 billion (SDR 760 million) under the EFF, bringing total disbursements under the program to about US$2.0 billion,” the IMF said in a statement.

Advisor to Finance Minister Khurram Schehzad also confirmed the development and said that Pakistan is making ‘significant’ strides in economic reforms, focusing on tax equity, monetary stability, energy sector transformation, and climate resilience.

In its statement, the IMF maintained that over the past 18 months, Pakistan has made significant progress in restoring macroeconomic stability and rebuilding confidence despite a challenging global environment.

“While economic growth remains moderate, inflation has declined to its lowest level since 2015, financial conditions have improved, sovereign spreads have narrowed significantly, and external balances are stronger. While economic activity is expected to steadily improve, downside risks also remain elevated,” the monetary fund said and added that, “Potential macroeconomic policy slippages—driven by pressures to ease policies—along with geopolitical shocks to commodity prices, tightening global financial conditions, or rising protectionism could undermine the hard-won macroeconomic stability.”

According to the IMF, climate-related risks continue to pose a significant challenge for Pakistan, creating a need to build resilience including through adaptation measures.

“In this regard, it is critical to stay the course and entrench the progress achieved over the past one and a half years, building resilience by further strengthening public finances, ensuring price stability, rebuilding external buffers and eliminating distortions in support of stronger, inclusive and sustained private sector-led growth.”

The IMF team also expressed gratitude to the Pakistani authorities, private sector, and development partners for their hospitality during the visit to Islamabad and Karachi, and ‘fruitful’ discussions.