Karachi February 4 2022: Following the successful completion of the 6th review of the IMF program, State Bank of Pakistan has received the next tranche of USD 1.053 billion from IMF.
This brings total purchases for budget support under the program to SDR 2,144 million (about USD 3 billion, or 106 percent of quota).
The EFF was approved by the Executive Board on July 3, 2019 for SDR 4,268 million (about US$6 billion at the time of approval, or 210 percent of quota). The program aims to support Pakistan's policies to help the economic recovery from the COVID-19 pandemic, ensure macroeconomic and debt sustainability, and advance structural reforms to lay the foundations for strong, job-rich, and long-lasting growth that benefits all Pakistanis.
Pakistan entered the COVID-19 pandemic with strengthened buffers, following the approved EFF program. A strong economic recovery has gained hold since summer 2020, benefiting from the authorities’ multifaceted policy response to the unprecedented shock. At the same time, external pressures also started to emerge in 2021, including a widening current account deficit and depreciation pressures on the exchange rate which also reinforced domestic price pressures.
The recent policy adjustment was appropriate to address these challenges and maintain economic stability. The economy is set to continue recovering in FY 2022, with real GDP growth projected at 4 percent, while inflation is expected to pick up this year before gradually slowing down. Continued commitment to a market-determined exchange rate and a prudent macroeconomic policy mix will help reduce the current account deficit, and ease external pressures over the medium term.
However, Pakistan remains vulnerable to possible flare-ups of the pandemic, tighter international financial conditions, a rise in geopolitical tensions, as well as delayed implementation of structural reforms. Strengthening the medium-term outlook hinges on ambitious efforts to remove structural impediments and facilitate the structural transformation of the economy. To this end, increased focus is needed on measures to strengthen economic productivity, investment, and private sector development, as well as to address the challenges posed by climate change.
The Executive Board also approved today the authorities' request for waivers of applicability and nonobservance of performance criteria.
Following the Executive Board's discussion on Pakistan, Ms. Antoinette Sayeh, Deputy Managing Director and Acting Chair, issued the following statement:
“The Pakistani economy has continued to recover despite the challenges from the COVID-19 pandemic, but imbalances have widened and risks remain elevated. The authorities’ recent policy efforts to strengthen economic resilience are welcomed. Timely and consistent implementation of policies and reforms remain essential to lay the ground for stronger and more sustainable growth.
“The authorities have taken important measures to strengthen fiscal policy and put public finances on a sounder footing. Along with careful spending management, revenue mobilization will help to create space for much-needed spending on infrastructure and social protection, while improving debt sustainability. Maintaining the momentum on the reform of personal income taxation and harmonization of general sales taxes is essential. Broader reforms in tax administration and public financial and debt management are expected to further improve the fiscal framework.