ISLAMABAD, Pakistan: The International Monetary Fund (IMF) said Thursday it had made “significant progress” toward reaching a staff-level agreement (SLA) with Pakistan following nearly two weeks of talks in Karachi and Islamabad.
An IMF mission led by Iva Petrova met with Pakistan’s economic team in Karachi and Islamabad from September 24 to October 8 to review the implementation of the $7 billion Extended Fund Facility (EFF) and $1.1bn Resilience and Sustainability Facility (RSF). The programme’s performance as of the end of June this year — the period under review — has been mixed.
Last month, Prime Minister Shehbaz Sharif had urged the lender to take into account the recent flood damage in its review for the country.
In a statement released early on Thursday, the Fund quoted Petrova as saying, “The IMF mission and the Pakistani authorities made significant progress toward reaching a staff-level agreement on the second review under the 37-month extended arrangement under the EFF and on the first review of 28-month arrangement under the RSF”.
Fiscal Consolidation and Energy Sector Reforms
The IMF noted that Pakistan’s “program implementation remains strong, and broadly aligned with the authorities’ commitments.” It said the discussions focused on sustaining fiscal consolidation, tightening monetary policy, and restoring the viability of the energy sector.
“Significant progress was made in the discussions in several areas, including sustaining fiscal consolidation to strengthen the public finances while providing needed flood recovery support; ensuring inflation remains durably within the SBP’s target range by maintaining an appropriately tight and data-dependent monetary policy; restoring the viability of the energy sector by implementing regular tariff adjustments and cost-reducing reforms,” she said.
The Fund also emphasized reforms to reduce the state’s footprint, strengthen transparency, and liberalize commodity markets — areas where progress has been closely watched by investors and development partners.
Climate Resilience and Ongoing Talks
The IMF acknowledged Pakistan’s ongoing climate reform agenda, noting that “productive discussions were also held on the authorities’ reform agenda to strengthen climate resilience, including the completion of reform measures under the RSF.”
“The IMF team and the authorities will continue policy discussions with a view to settling any outstanding issues,” she added.
The Fund expressed sympathy to communities affected by recent floods and thanked Pakistani authorities and development partners “for many fruitful discussions and their hospitality throughout this mission.”
She said that the IMF team and the authorities would continue policy discussions “with a view to settling any outstanding issues”.
She concluded by saying, “The IMF team wants to express its sympathy to those affected by the recent floods, and is grateful to the Pakistani authorities, private sector, and development partners for many fruitful discussions and their hospitality throughout this mission.”
Pakistan and the IMF reached a three-year, $7bn aid package deal in July last year, giving much-needed respite to the nation. The programme aimed to enable Pakistan to “cement macroeconomic stability and create conditions for stronger, more inclusive and resilient growth”.
In May this year, the IMF board approved a fresh $1 billion loan to help Pakistan strengthen its economic resilience to climate vulnerabilities and natural disasters. However, the disbursement of funds is contingent upon successful completion of reviews under the EFF, an IMF official said.
