3 May: The International Monetary Fund (IMF) has reached a staff-level agreement with Pakistan to resume its $6 billion bailout program, but the deal is subject to approval by the IMF’s management and executive board, according to a report by The Express Tribune.
The IMF suspended its program with Pakistan in April 2020 due to the COVID-19 pandemic and disagreements over fiscal and monetary policies. Since then, Pakistan has faced mounting economic pressures, including high inflation, low growth, rising debt and a widening current account deficit.
The IMF and Pakistan have been negotiating for months to revive the program, which was launched in 2019 to help the country address its balance of payments crisis and implement structural reforms. The staff-level agreement, announced on December 13, 2022, is based on Pakistan’s commitment to implement fiscal consolidation, monetary tightening, energy sector reforms and anti-corruption measures.
However, the agreement is not final and could face hurdles in getting approval from the IMF’s management and executive board, which represent the interests of the IMF’s 190 member countries. The report by The Express Tribune cited unnamed sources who said that some board members, especially from Western countries, were skeptical about Pakistan’s ability and willingness to implement the agreed reforms.
The report also said that some board members were concerned about Pakistan’s security situation and its relations with neighboring countries, especially India and Afghanistan. The report quoted a source who said that “the IMF board members are not happy with Pakistan’s foreign policy”.
The IMF’s agreement with Pakistan is also contingent on the country securing adequate financing from other sources, such as bilateral and multilateral lenders. The report said that Pakistan was expecting to receive $3 billion from Saudi Arabia, $1 billion from China and $500 million from the World Bank in the coming months.
The IMF’s agreement with Pakistan comes at a time when the global economy is facing multiple challenges, including rising inflation, geopolitical tensions, slowing growth in China and a potential recession in 2023. The IMF’s Managing Director Kristalina Georgieva said on Thursday that the world economy would grow less than 3% in 2023 and remain around 3% for the next five years. She also said that inflation was a “clear and present danger” that required “forceful” action by central banks.
Pakistan’s economy is expected to grow by 4% in 2022 and 4.5% in 2023, according to the IMF’s latest projections. However, these forecasts are subject to downside risks, such as further waves of COVID-19 infections, social unrest, political instability and external shocks.