IMF stresses steadfast policy implementation for Pakistan’s structural challenges

ISLAMABAD – International Monetary Fund said steadfast policy implementation is critical for success of the standby arrangement programme.

Fund’s Director of Strategic Communications Julie Kozack said resolving structural challenges of South Asian nation will likely require continued reforms over the medium term to underpin the needed economic transformations.

In a briefing in US capital, IMF senior official stressed significance of reforms in strengthening inclusive growth prospects and creating a favorable environment for attracting private capital inflows.

Kozack said a shorter program with cash strapped country will help the authorities’ immediate efforts to stabilize the economy, saying it ensures that the current balance of payments needed is filled.

She mentioned that standby arrangement programme is relatively a short program, but it provides time to implement policies critical to strengthening it is domestic and external economic situation.

Earlier this week, IMF Executive Board approved the $3 billion stand-by arrangement for Pakistan. The arrangement comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods, and policy missteps have led to large fiscal and external deficits, rising inflation, and eroded reserve buffers in FY23.

The new SBA-supported program provides a policy anchor for addressing domestic and external imbalances and a framework for financial support from multilateral and bilateral partners, and will focus on implementation of the FY24 budget to facilitate Pakistan’s needed fiscal adjustment and ensure debt sustainability, while protecting critical social spending, and a return to a market-determined exchange rate.

The country’s economy was hit hard by significant shocks last year, notably the spillovers from the severe impacts of floods, the large volatility in commodity prices, and the tightening of external and domestic financing conditions. These factors together with uneven policy implementation under the EFF combined to halt the post-pandemic recovery, sharply increase inflation, and significantly depleted internal and external buffers.