IMF Approves $1.1 Billion Tranche for Pakistan, Urges Structural Reforms

The International Monetary Fund (IMF) has greenlit the disbursement of a $1.1 billion installment for Pakistan, citing the country’s adherence to policy frameworks aimed at advancing reforms in government-owned enterprises.

In a statement, the IMF announced the successful completion of Pakistan’s second review under the 9-month loan program initiated in July 2023. The IMF highlighted Pakistan’s concerted efforts in meeting the program’s targets and applauded the country’s commitment to economic reforms.

According to the IMF, Pakistan has shown promising signs of progress, with a notable decrease in the inflation rate and an uptick in economic growth, which is expected to reach 2 percent post-program. Additionally, Pakistan’s net foreign exchange reserves have surged from $4.5 billion to $8 billion, indicating improved financial stability.

While acknowledging these achievements, the IMF emphasized the need for Pakistan to accelerate structural reforms to foster robust and inclusive growth. The IMF urged the government to prioritize measures aimed at protecting vulnerable segments of society, such as through the Benazir Income Support Program, and strengthening anti-corruption institutions.

In terms of fiscal indicators, the IMF revealed that Pakistan’s unemployment rate stood at 8.5 percent in the last fiscal year, with a slight decline expected to 8 percent in the current fiscal year. Furthermore, revenues and grants accounted for 11.4 percent of GDP last fiscal year, a figure projected to rise to 12.5 percent of GDP this year.

Regarding fiscal deficits, Pakistan recorded a budget deficit of 7.8 percent of GDP last fiscal year, with estimates suggesting a slight decrease to 7.5 percent of GDP in the current fiscal year. Similarly, the current account deficit, which stood at 0.7 percent of GDP last year, is projected to marginally increase to 0.8 percent of GDP this fiscal year.

The IMF’s decision to approve the new tranche for Pakistan was made during a meeting in Washington. Talks are scheduled to take place next month, with an IMF delegation expected to arrive in Pakistan for further discussions.

The IMF’s approval of the $1.1 billion tranche underscores its confidence in Pakistan’s economic trajectory and reform efforts. However, the IMF’s call for accelerated structural reforms highlights the ongoing challenges facing Pakistan’s economy and the imperative of implementing comprehensive measures to sustainably address them.