LAHORE: Pakistan and the International Monetary Fund have reached a staff-level agreement that clears the way for about $1.2 billion, a vote of confidence earned in a year of regional war and an oil shock.
The deal covers the fourth review of the $7bn Extended Fund Facility and the third review of the $1.4bn Resilience and Sustainability Facility. It also wraps up this year’s Article IV consultation.
Once the IMF Executive Board approves it, Pakistan will receive roughly $1bn under the main programme and $210 million in climate financing. That would take total disbursements under the two arrangements to about $5.7bn. The money is expected within four to five weeks.
Mission chief Iva Petrova, whose team held talks in Karachi and Islamabad from September 23 to October 7, said the authorities had steered through the fallout of the Middle East conflict and that firm policies had protected stability.
The Fund’s numbers back the claim. Growth ran at 4% in the first three quarters of the last fiscal year before energy costs slowed it, leaving the full-year estimate at 3.6%. Inflation eased to about 10.3% in September after peaking in May.
Reserves tell the strongest story. They stood near $21.5bn at the end of September, up from $16.4bn in late March, even though Islamabad returned $3.45bn in deposits to the UAE in April.
There is a price. The IMF wants the Rs100-a-litre petrol relief for motorcycles, rickshaws and small cars wound up promptly, calling it costly and poorly targeted. The fate of that scheme had hung over the talks from the start.
Islamabad has also promised higher budgets for health and education, and a primary surplus of around 2% of GDP is expected, according to local reports. Structural homework remains, from privatisation to an investment climate in which foreign direct investment recently fell 32%.
Ms Petrova closed the mission with a wrap-up meeting with Finance Minister Muhammad Aurangzeb, attended by Finance Secretary Imdad Ullah Bosal and IMF Resident Representative Mahir Binici.
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