Pakistan on Track to Complete IMF Program, Awaits New Government and Legal Amendments

Pakistan has achieved 25 out of the 26 targets set by the International Monetary Fund (IMF) for the second economic review under its $3 billion Stand-By Arrangement (SBA), according to the Ministry of Finance.

The ministry has sent a comprehensive report to the IMF, detailing the implementation of the targets that cover fiscal, monetary, exchange rate, and structural policies.

The only target that remains unfulfilled is the amendment of laws governing some government-owned institutions, such as the National Highway Authority (NHA), Pakistan Post, and Pakistan Broadcasting Corporation. These amendments are aimed at improving the governance and financial performance of these entities, which have been a source of fiscal burden for the government.

The caretaker government, which took charge in January after the dissolution of the previous parliament, has shown commitment and diligence in meeting the IMF targets, despite the challenging economic situation and the political uncertainty ahead of the general elections.

Some of the key achievements of the caretaker government include:

  • Refraining from borrowing from the State Bank of Pakistan (SBP), which helps to contain inflation and preserve the central bank’s independence.
  • Ensuring timely payment of external debts, which helps to maintain the country’s creditworthiness and avoid default.
  • Clearing arrears in the power sector, including tax dues and refund payments, which helps to reduce circular debt and improve the cash flow of the power companies.
  • Eliminating tax exemptions and amnesty schemes, which helps to broaden the tax base and increase revenue collection. The Federal Board of Revenue (FBR) has confirmed the full implementation of these measures.
  • Maintaining a market-determined exchange rate and a 1.25% margin in interbank and open market currency transactions, which helps to absorb external shocks and eliminate foreign exchange shortages.
  • Implementing key reforms in the energy sector, such as the timely rebasing of electricity rates and gas prices, which helps to reflect the true cost of production and consumption, and to promote energy efficiency and conservation.

The IMF has praised Pakistan’s progress on the economic reform program, which aims to stabilize the economy and create space for social and development spending. The IMF has also provided financial support to Pakistan, disbursing $1.2 billion in July 2023, after the approval of the SBA.

However, the IMF has also stressed the need for steadfast policy implementation and further progress on reforms, especially in the areas of energy sector viability, state-owned enterprise governance, and climate resilience.

The IMF mission is expected to visit Pakistan after the formation of the new government, following the general elections scheduled for March 2024. The mission will review the comprehensive report on the implementation of targets and assess the status of the remaining target on the legal amendments.

If the IMF is satisfied with Pakistan’s performance, it will approve the final installment of $1.1 billion, which will mark the completion of the SBA. This will also pave the way for Pakistan to access financing from other multilateral and bilateral partners, and to pursue a sustainable, inclusive, and green growth path.

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