Mohsin Siddiqui (Chief Reporter)
The International Monetary Fund (IMF) Executive Board has tentatively scheduled approval for the Staff-Level Agreement (SLA) with Pakistan, marking the first review of the $3 billion Stand-By Arrangement (SBA) on December 7. This approval is poised to trigger a significant disbursement of approximately $700 million on December 8.
As per the end-of-mission statement released on November 15 in Islamabad, the SLA agreement was successfully reached between IMF staff and Pakistani authorities. This agreement is instrumental in providing Pakistan access to SDR 528 million (approximately $700 million), contributing to a cumulative disbursement of nearly $1.9 billion under the $3 billion SBA.
Following this development, Caretaker Finance Minister Dr Shamshad Akhtar, on the subsequent day, announced the postponement of a $1.5 billion Eurobond launch due to unfavorable global financial conditions. The minister also committed to periodic adjustments in electricity and gas rates to prevent the further accumulation of circular debt.
The IMF mission, while advising the return to a market-determined exchange rate, emphasized potential risks stemming from geopolitical tensions, rising commodity prices, and challenging global financial conditions. Authorities were further advised to sustain efforts toward building resilience.
The IMF reiterated the paramount importance of strengthening macroeconomic sustainability and setting conditions for balanced growth under the SBA. Authorities were urged to persist in fiscal consolidation to reduce public debt while safeguarding developmental needs. A primary surplus target of at least 0.4% of GDP in FY24 was established, supported by spending restraint and improved revenue performance, with contingent measures if necessary.
Both parties agreed on additional reforms to reduce costs in the energy sector and enhance its viability. Given the circular debt surpassing 4% of GDP across power and gas sectors, immediate actions were deemed critical. These actions included power tariff adjustments pending since July 2023 and increased gas prices effective November 1, 2023.
The fund emphasized the urgency of reverting to a market-determined exchange rate and rebuilding foreign exchange reserves. Recognizing the necessity for the rupee to remain market-determined to alleviate external pressures sustainably and rebuild reserves, the IMF expressed appreciation for this strategic approach.
