ISLAMABAD: Amid ongoing political turmoil and economic downturn, Pakistan on Wednesday saw significant financial developments, as on the one hand, the country received $700 million from the IMF as the second tranche of the Standby bailout arrangement, while on the other, the UAE confirmed the rollover of its US$ 1 billion deposit for another year
The IMF’s disbursement second tranche reflects the successful completion of the first review under the Stand−By Arrangement (SBA). It will be reflected in State Bank of Pakistan (SBP) reserves for the week ending on January 19, 2024.
Additionally, the UAE has confirmed the rollover of its two deposits of US$1 billion each with SBP for another year, which were maturing in January 2024, further bolstering Pakistan’s financial position.
With the recent disbursement, the total amount received under the SBA with the IMF now amounts to $1.9 billion, providing crucial support for Pakistan’s economic stability.
The IMF has adjusted its economic projections for Pakistan, cutting the country’s economic growth forecast to 2% and lowering the inflation rate projection to nearly 24%. These adjustments create space for potential interest rate reductions and highlight the need for continued fiscal consolidation to reduce public debt while safeguarding development priorities. Pakistan has reaffirmed its commitment to achieving a primary surplus of at least 0.4% of GDP in FY24 and returning to a market-determined exchange rate.
In addition to the revised economic projections, the IMF has also adjusted Pakistan’s foreign loan requirements to $25 billion for the current fiscal year, while lowering its inflation projection to 24%.
Furthermore, the IMF has successfully secured a date for the next general elections in Pakistan and brought the activities of the Special Investment Facilitation Council (SIFC) under its purview, signaling a collaborative approach to economic and governance reforms.
According to IMF projections, current expenditures in this fiscal year may remain around Rs14.6 trillion, with development spending projected at Rs782 billion. The IMF has maintained the overall primary balance figure at 0.4% of the GDP or Rs401 billion, which will require substantial revenue efforts and a reduction in subsidies. Pakistan has committed to further increase petroleum levy collection to a record Rs918 billion in this fiscal year, demonstrating its dedication to fiscal reforms and revenue generation.
