Pakistan: IMF Reaches Staff-Level Agreement
The Pakistani authorities and the IMF have reached a staff-level agreement on a 37-month Extended Fund Arrangement (EFF) worth approximately US$7 billion, pending approval by the IMF's Executive Board and confirmation of necessary financing from Pakistan’s development and bilateral partners. (12 July 2024)
The program aims to build on last year's macroeconomic stability by strengthening public finances, reducing inflation, rebuilding external buffers, and removing economic distortions to encourage private sector growth. Key policy goals include:
- Sustainable Public Finances: Gradual fiscal consolidation through tax reforms and increased resources for development and social spending. FY25 budget aims for a 1% GDP primary surplus, supported by fairer taxation and expanded social protection.
- Federal-Provincial Fiscal Balance: A National Fiscal Pact reallocates spending responsibilities, enhancing provincial tax efforts, including harmonized agricultural income tax starting January 1, 2025.
- Inflation and Financial Stability: Focused monetary policy to support disinflation, flexible exchange rate maintenance, and measures to deepen financing access while strengthening financial institutions.
- Energy Sector Viability: Timely energy tariff adjustments, cost-reducing reforms, targeted subsidy reforms, and avoiding unnecessary generation capacity expansion.
- Private Sector and Export Growth: Improving the business environment, enhancing SOE management, privatization, and removing state distortions. Advancing anti-corruption, governance, transparency reforms, and gradual trade policy liberalization.