Washington, DC 12, July 2023: The International Monetary Fund (IMF) Executive Board today agreed a Stand-By Arrangement (SBA) for Pakistan for a period of nine months in the amount of SDR2,250 million (about $3 billion, or 111 percent of quota), in order to assist the government’s economic stabilisation programme.
The objective of Pakistan’s economic reform programme is to assist short-term efforts to maintain economic stability and protect against shocks while allowing for social and development expenditures to benefit the country’s citizens.
Pakistan’s and the program’s success will depend on steadfast policy execution. More budgetary restraint, a market-determined currency rate to withstand external pressures, and advancement in the energy sector, climate resilience, and business climate reforms are necessary to achieve this.
The Fund’s immediate disbursement will be SDR894 million (or about US$1.2 billion).
The arrangement comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods, and policy missteps have led to large fiscal and external deficits, rising inflation, and eroded reserve buffers in FY23.
The new SBA-supported programme for Pakistan will offer a framework for financial assistance from multilateral and bilateral partners as well as a policy foundation for resolving internal and external imbalances. The program’s main objectives are: (1) implementing the FY24 budget to help Pakistan make the necessary fiscal adjustments and ensure debt sustainability while safeguarding essential social spending; (2) returning to a market-determined exchange rate and ensuring proper FX market functioning to absorb shocks from the outside world and end FX shortages; (3) implementing an appropriately tight monetary policy to combat inflation; and (4) making further progress on structural reforms, particularly in the area of energy.
With the Executive Board’s agreement, SDR894 million (or approximately US$1.2 billion) may be disbursed immediately. The remaining sum will be phased in throughout the course of the programme, subject to two evaluations every quarter.
