IMF Reports ‘Significant Progress’ in Loan Negotiations with Pakistan

IMF Reports

The International Monetary Fund (IMF) announced on Thursday that “significant progress” has been made towards reaching a staff-level agreement on an extended fund facility (EFF) with Pakistan. This announcement follows a series of discussions held from May 13 to 23.

An IMF team, led by Nathan Porter, the IMF’s Mission Chief to Pakistan, visited Islamabad to discuss the country’s plans for a home-grown economic program. This program is intended to receive support under the IMF’s EFF.

The visit by the IMF team was in response to a request from the Pakistani government. According to a statement from the IMF chief, the mission and Pakistani authorities will continue their policy discussions virtually in the coming days. These discussions aim to finalize the details, including the financial support required to support Pakistan’s reform efforts from the IMF and its bilateral and multilateral partners.

Pakistan is expected to seek at least $6 billion under the new program and will request additional financing from the IMF’s Resilience and Sustainability Trust.

Before the discussions began, the IMF had cautioned that the downside risks to Pakistan’s economy remained exceptionally high.

Building on the economic stabilization achieved through the successful completion of the 2023 Stand-by Arrangement, the IMF and Pakistani authorities have made significant strides toward reaching a Staff-Level Agreement (SLA) on a comprehensive economic policy and reform program that can be supported under an EFF.

The reform program outlined by Pakistani authorities aims to transition the country from economic stabilization to strong, inclusive, and resilient growth. Key objectives include strengthening public finances through improved domestic revenue mobilization and fairer taxation, increasing spending on human capital, social protection, and climate resilience, ensuring energy sector viability through reforms to reduce high energy costs, maintaining low and stable inflation through appropriate monetary and exchange rate policies, enhancing public service provision through restructuring and privatizing state-owned enterprises (SOEs), and promoting private sector development by creating a level playing field for investment and improving governance.

Porter also commended Pakistani authorities, the private sector, and development partners for their fruitful discussions during the mission.