The IMF deal with Pakistan

 The IMF deal with Pakistan is a recent development that has been in the news. The IMF stands for the International Monetary Fund, which is an organization of 190 countries that works to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and diminish poverty around the world.

Pakistan has a history of seeking bailouts from the IMF since 1958. The most recent extended fund facility package of $6 billion was agreed upon in July 2019 for a period of 39 months. However, the program was stalled due to the COVID-19 pandemic and its economic impact2. In April 2020, the IMF approved a rapid financing instrument of $1.386 billion to help Pakistan with its balance of payment needs.

In November 2021, Pakistan reached a staff-level agreement with the IMF to restore the stalled program and secure an additional $1.2 billion in loans. The IMF also agreed to extend the program by a year and augment the funds by $1 billion. The IMF support is conditional on Pakistan’s commitment to generate more taxes and increase petroleum levy. The IMF funds will also unlock more financing from other sources.

On June 29, 2023, the IMF and Pakistan have reached another staff-level agreement for a stand-by arrangement worth $3 billion. This agreement comes at a serious time for Pakistan, as it was facing the risk of defaulting on its financial obligations. The stand-by arrangement will support the authorities’ immediate efforts to stabilize the economy from recent external shocks, preserve macroeconomic stability and provide a framework for financing from multilateral and bilateral partners3. The new arrangement will also create space for social and development spending through improved domestic revenue mobilization and careful spending execution to help address the needs of the Pakistani people.

The stand-by arrangement is subject to approval by the IMF’s Executive Board, which is expected to consider this request by mid-July3. The new arrangement builds on the authorities’ efforts under Pakistan’s 2019 EFF-supported program which expires end-June3. Steadfast policy implementation is key for Pakistan to overcome its current challenges, including through greater fiscal discipline, a market determined exchange rate to absorb external pressures, and further progress on reforms, particularly in the energy sector, to promote climate resilience, and to help improve the business climate.

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