IMF has approved a 37-month Extended Fund Facility for Pakistan amounting to SDR 5.32bn (~USD 7bn), the second highest amount ever agreed upon under any IMF program regarding SDRs. Following this approval, an initial disbursement of SDR 760mn (~USD 1.1bn) has been released.

§  The new IMF program is underpinned by effective policies and reforms aimed at assisting the Pakistani authorities in enhancing macroeconomic stability, addressing significant structural challenges, and creating conditions conducive to stronger, more inclusive, and resilient growth.

§  Key priorities under the new EFF-supported program are:

§  Rebuilding policy credibility and achieving macroeconomic sustainability: This requires consistent implementation of sound fiscal, monetary, and exchange rate policies. Priorities include better public spending, fairer and more efficient taxation, especially from undertaxed sectors, and creating fiscal space for increased spending on health, education, and social protection programs.

§  Enhancing productivity and competitiveness: Reforms should focus on improving the private sector business environment by removing state-created distortions and ensuring a fair and competitive playing field. This includes streamlining subsidies, improving the foreign direct investment regime, deepening bank intermediation, and scaling up investment in human capital.

§  Restructuring Sate-Owned Enterprises (SOEs) and public service improvement: SOE reform and privatization, coupled with governance and transparency measures, will help improve public service provision. Additional measures include reducing the cost structure of the energy sector and phasing out the government’s role in price setting.

§  Building climate resilience: Implementing the C-PIMA Action Plan and supporting the National Adaptation Plan will strengthen the country’s resilience to climate change, with a focus on sustainable infrastructure and disaster risk reduction.

Courtesy – AHL Research