KARACHI: The International Monetary Fund (IMF) said on Thursday it was looking forward to working with Pakistan and was ready to send a mission to the South Asian country to discuss the second review of its ongoing program.
Pakistan came to the brink of a sovereign default in June last year but averted it by securing a $3 billion stand-by arrangement (SBA) from the global lender which expires next month. The country urgently needs a fresh IMF agreement to shore up its struggling $350 billion economy, which is suffering from high inflation, low reserves and mounting external financing needs.
Speaking at a briefing late Thursday, IMF spokesperson Julie Kozack said Pakistani authorities had maintained economic stability by strictly adhering to fiscal targets, while protecting social safety net, maintaining a tight monetary policy stance to control inflation, and continuing to build foreign exchange reserves.
“This has been done at the same time as implementing timely adjustments in tariffs to shore up the viability of the energy sector,” she said at a briefing.
“The IMF stands ready to hold a mission for the second review of the Stand-by [Arrangement] shortly after a new cabinet is formed. We look forward to working with the new government on policies to ensure macroeconomic stability.”
Asked about political instability in the country, Kozack declined to comment on the political situation and said their focus was only on the completion of the current IMF program.
The development comes days after Shehbaz Sharif once again assumed the prime minister’s office following last month’s national election, which has been marred by allegations of vote-rigging and result manipulation by the opposition.
One of the foremost challenges facing Sharif and his government is to negotiate a long-term bailout program with the IMF as Pakistan’s fragile $350 billion economy is in desperate need of external financing.
After being sworn-in this week, Sharif chaired an hours-long meeting in which he tasked authorities to devise an action plan to revive Pakistan’s economy.
“We have got the mandate to improve the economy and this is the top priority of our government,” he was quoted as saying by the state media.
Inflation touched a high of 38 percent with record depreciation of the national currency under Sharif’s last government from April 2022 till August 2023, mainly due to structural reforms necessitated by the IMF program.
Pakistan continues to be engulfed in an economic crisis, with inflation hovering around 30 percent and economic growth slowing to around 2 percent.
For Islamabad, committing to a new IMF program will mean committing to steps needed to stay on a narrow path to recovery. This would limit policy options to provide relief to a deeply frustrated population and cater to industries that are looking for government support to spur growth.
