The International Monetary Fund (IMF) will conduct its second and last review of Pakistan’s $3 billion stand-by arrangement (SBA) this week, the finance ministry and the IMF said on Wednesday, during which the South Asian country would request a fresh longer-term bailout.
The four-day evaluation begins on Thursday, according to the ministry, and if successful, will release a last tranche of around $1.1 billion obtained by Islamabad under a last-ditch rescue plan last summer, preventing a sovereign debt default.
“Pakistan has met all structural benchmarks, qualitative performance criteria, and indicative targets for the successful completion of the IMF review,” the ministry noted, hoping for a positive IMF staff level agreement following the evaluation.
“The mission will be focused on (the) completion of Pakistan’s current SBA-supported program, which ends in April 2024,” the fund stated via a representative.
Prime Minister Shehbaz Sharif has already asked his financial team, lead by newly appointed financial Minister Muhammad Aurangzeb, to begin work on obtaining an Extended Fund Facility (EFF) once the current standby arrangement expires on April 11.
According to the Dawn newspaper, Aurangzeb told reporters on Tuesday that Pakistan will take advantage of the IMF assessment to make the case for a larger, longer-term program.
The global lender has stated that if Islamabad applies, it would develop a medium-term scheme.
The government has not formally announced the amount of additional funds it seeks through a successor scheme.
Pakistan will be “very keen to start discussions on another EFF with them during these talks,” the finance minister said, adding that more talks will take place at the IMF and World Bank’s spring meetings in Washington in April.
Sajid Amin Javed, Deputy Executive Director of the Sustainable Development Policy Institute, believes Pakistan urgently requires a new IMF program to handle external financial requirements and economic recovery.
“It is encouraging to see that the new government is clear, unlike the past two experiences where engagements with IMF were delayed due to political baggage,” he said in a statement.
Aurangzeb hopes to restore stability to a country beset by catastrophic boom-bust cycles that have resulted in more than 20 IMF bailouts in the past.
The debt-ridden economy, which dropped 0.2% last year and is anticipated to expand about 2% this year, has been under great stress due to insufficient reserves, a balance-of-payments crisis, 23 percent inflation, 22 percent policy interest rates, and record local currency depreciation.
Prior to the stand-by arrangement, Pakistan was required to satisfy IMF criteria such as modifying its budget and boosting interest rates as well as electricity and gas prices.
The IMF also convinced Pakistan to levy $1.34 billion in additional levies. The measures generated an all-time high year-on-year inflation rate of 38 percent in May.
Iqra Khan