Islamabad seeking 24th bailout, IMF confirms
Announcing the staff-level agreement on the successful completion of the existing short-term facility, the International Monetary Fund (IMF) confirmed Pakistan was seeking a 24th medium-term bailout package for a permanent push towards longstanding structural reforms.
In its end-of-mission statement, the IMF said that subject to the approval of its executive board, the staff-level agreement would enable Pakistan to access about $1.1 billion, 828 million special drawing rights (SDR), by late April.
It said Pakistan “expressed interest in a successor medium-term Fund-supported programme with the aim of permanently resolving Pakistan’s fiscal and external sustainability weaknesses, strengthening its economic recovery, and laying the foundations for strong, sustainable, and inclusive growth”.
It said the IMF team reached a staff-level agreement with the Pakistani authorities on the second and final review of Pakistan’s stabilisation programme supported by the IMF’s $3 billion standby arrangement approved in July last year.
While doing so, the Fund also laid bare the broader, though wellknown, conditionalities of the next programme on which “discussions are expected to start in the coming months”, the statement added.
As in the past programmes, four central areas would remain under focus for reforms.
The top objective of the next medium-term programme, Extended Fund Facility of about 36 to 39 months, would be strengthening public finances, including through gradual fiscal consolidation and broadening the tax base, especially in undertaxed sectors (read real estate, retail and wholesale trade and agriculture) and improving tax administration to improve debt sustainability and create space for higher priority development and social assistance spending to protect the vulnerable.
The second objective of the next programme would be restoring the energy sector’s viability by accelerating cost-reducing reforms, including through improving electricity transmission and distribution, moving captive power demand to the electricity grid, strengthening distribution company governance and management, and undertaking effective antitheft efforts.
The third key objective is returning inflation to the target, with a deeper and more transparent flexible foreign exchange market supporting external rebalancing and rebuilding foreign exchange reserves.
The fourth and last critical aim would be promoting private-led activity through the above-mentioned actions as well as the removal of distortionary protection, advancement of state-owned enterprises (SOEs) reforms to improve the sector’s performance, and the scaling up investment in human capital to make economic growth more resilient and inclusive and enable Pakistan to reach its economic potential.