The International Monetary Fund (IMF) has confirmed that Pakistan is seeking its 24th bailout package, as outlined in a recent staff-level agreement. This agreement follows the successful completion of the existing short-term facility and aims to address Pakistan's long-standing fiscal and external sustainability issues.

The IMF's statement highlighted that the agreement could allow Pakistan to access approximately USD 1.1 billion (or 828 million special drawing rights) by late April, pending approval from the IMF's executive board.

This includes gradual fiscal consolidation and broadening the tax base, particularly in under-taxed sectors such as real estate and agriculture, to improve debt sustainability and allocate funds for social assistance.

The program aims to implement cost-reducing reforms in the energy sector, enhancing electricity transmission and distribution, and addressing issues related to power theft.

A transparent foreign exchange market will be promoted to support external rebalancing and rebuild foreign exchange reserves.

The program will encourage private-led growth through reforms in state-owned enterprises and investments in human capital to foster resilient economic growth.

The IMF acknowledged the "strong program implementation" by Pakistan's State Bank and caretaker government, which has contributed to recent improvements in the country's economic conditions. However, challenges remain, with modest growth expectations and inflation still above target levels. Ongoing policy efforts are deemed essential to address these economic vulnerabilities amidst significant external and domestic financing needs.

Finance Minister Muhammad Aurangzeb has indicated that negotiations with the IMF are a priority for his new administration, particularly as the current USD 3 billion Stand-By Arrangement is set to expire soon. The timely support from the IMF last year was crucial in helping Pakistan avoid a potential default on its external liabilities.

Agencies