The International Monetary Fund released about $1.1 billion to Pakistan as part of its seventh and eighth reviews of the country’s bailout programme helping it avoid a Sri Lanka-like default crisis.
The IMF also agreed to extend the programme by a year to the end of June 2023 and increase the total funding by about $940 million. The release of funds will bring the total support for the country from the Washington-based lender under the programme to about $6.5bn.
Soaring prices globally and a delayed policy action by Pakistan’s government worsened the country’s finances, which led to significant exchange rate depreciation, a surge in inflation and an erosion of its foreign currency reserves.
A weakening economy forced the government to raise fuel prices by more than 20 per cent this year and the country is now suffering from floods that have led to at least $10bn of damage and killed at least 1,000 people.
Pakistan’s inflation hit 14-year high in July exacerbated by a weak currency. Consumer prices surged to 24.93 per cent in July from a year earlier and a 21.3 per cent jump in June.
“Pakistan’s economy has been buffeted by adverse external conditions, due to spillovers from the war in Ukraine, and domestic challenges, including from accommodative policies that resulted in uneven and unbalanced growth,” said Antoinette Sayeh, the IMF’s deputy managing director and acting chair.
“Steadfast implementation of corrective policies and reforms remain essential to regain macroeconomic stability, address imbalances and lay the foundation for inclusive and sustainable growth.” Pakistan secures $1.1bn in IMF bailout funding Country’s immediate priority is to continue the implementation of the recently approved budget for the 2023 fiscal year, funds says Pakistani men receive food, distributed by Pakistani Army troops in a flood-hit area in Rajanpur, district of Punjab. Flooding from the highest rainfall in more than three decades has killed at least 1,000 people and caused more than $10bn in damage.
The International Monetary Fund released about $1.1 billion to Pakistan as part of its seventh and eighth reviews of the country’s bailout programme helping it avoid a Sri Lanka-like default crisis.
The IMF also agreed to extend the programme by a year to the end of June 2023 and increase the total funding by about $940 million. The release of funds will bring the total support for the country from the Washington-based lender under the programme to about $6.5bn.
Soaring prices globally and a delayed policy action by Pakistan’s government worsened the country’s finances, which led to significant exchange rate depreciation, a surge in inflation and an erosion of its foreign currency reserves.
A weakening economy forced the government to raise fuel prices by more than 20 per cent this year and the country is now suffering from floods that have led to at least $10bn of damage and killed at least 1,000 people.
Pakistan’s inflation hit 14-year high in July exacerbated by a weak currency. Consumer prices surged to 24.93 per cent in July from a year earlier and a 21.3 per cent jump in June.
“Pakistan’s economy has been buffeted by adverse external conditions, due to spillovers from the war in Ukraine, and domestic challenges, including from accommodative policies that resulted in uneven and unbalanced growth,” said Antoinette Sayeh, the IMF’s deputy managing director and acting chair.
“Steadfast implementation of corrective policies and reforms remain essential to regain macroeconomic stability, address imbalances and lay the foundation for inclusive and sustainable growth.” Pakistan raises fuel prices by 20% to unlock IMF funding Pakistan’s PM Shehbaz Sharif needs to revive the economy amid political turmoil The IMF said Pakistan’s authorities took important measures to address the country’s worsened fiscal and external positions and spillovers from the Ukraine war that placed significant pressure on the rupee and foreign reserves.
With inflation this year estimated to reach as much as 20 per cent in the country, Pakistan’s central bank raised interest rates in July by 125 basis points to 15 per cent.
The tightening of monetary conditions through higher policy rates was a necessary step to contain inflation and continued tight monetary policy would help to reduce inflation and help address external imbalances, the IMF said.
Ms Sayeh said a plan by Pakistan to achieve a small primary surplus in its 2023 fiscal year will help reduce fiscal and external pressures and build confidence.
Pakistan’s current account deficit stood at more than $12bn between July 2021 and February 2022, in stark contrast to a $1bn surplus in the same period a year earlier.
Containing current spending and mobilising tax revenues are critical to create space for much-needed social protection and strengthen public debt sustainability, Ms Sayeh said.
Efforts by the government to strengthen the energy sector and reduce unsustainable losses, including by adhering to the scheduled increases in fuel levies and energy tariffs, are “essential”, she said.
The government will need to accelerate structural reforms, strengthen governance and improve the performance of state-owned enterprises. “Reforms that create a fair-and-level playing field for business, investment, and trade necessary for job creation and the development of a strong private sector are essential.” Ms Sayeh said.
Further efforts to reduce poverty and protect the most vulnerable by enhancing targeted transfers are important, especially in the current high-inflation environment. Spending on development will need to be protected, and fiscal space needs to be created for expanding social support schemes.
Pakistan’s economy is projected to expand by about 3.5 per cent this year, according to the latest IMF projections. The economy grew 5.6 per cent in 2021. (National news)