The International Monetary Fund (IMF) has declared a $3 billion stand-by agreement with Pakistan to assist its struggling economy. This agreement comes as Pakistan faces the aftermath of last year’s devastating floods and the impacts of the Ukraine war.
June 30 (UPI) — The IMF has reached a staff-level agreement worth $3 billion with Pakistan. The agreement is awaiting approval from the IMF Executive Board, which is expected to review it in the middle of next month, as stated in an official announcement.
This deal is anticipated to provide Pakistan’s struggling economy with much-needed stability through an injection of U.S. dollars. It aims to preserve macroeconomic stability and establish a framework for partner financing.
“I am delighted to announce that Pakistan has reached a Staff-Level Agreement with the IMF on a nine-month U.S. $3 billion Stand-By Arrangement,” stated Pakistani Prime Minister Shehbaz Sharif in a statement issued on Friday. “This arrangement will bolster Pakistan’s foreign exchange reserves, promote economic stability, and set the country on a sustainable path of economic growth.”
This agreement arrives at a challenging time for Pakistan’s already struggling economy, which is grappling with the ramifications of last year’s catastrophic floods and soaring commodity prices exacerbated by Russia’s invasion of Ukraine.
According to an April overview by the IMF, Pakistan’s economy is currently under “severe stress” due to low foreign reserves, a depreciating currency, and high inflation. Economic activity has continued to decline, with expectations of sluggish growth persisting in the medium-term future.
In order to secure this deal, Pakistan had to implement various fiscal measures, including expanding the tax base, increasing tax collection from undertaxed sectors, and reducing spending, according to the IMF.
“Despite the authorities’ efforts to reduce imports and the trade deficit, reserves have reached dangerously low levels. The power sector also faces critical liquidity conditions, with mounting arrears (circular debt) and frequent power outages,” stated Nathan Porter, the head of the IMF team for Pakistan, in a press release.
“Given these challenges, the new Stand-By Arrangement will serve as a policy anchor and provide a framework for financial support from multilateral and bilateral partners in the coming months.”
