Pakistan poised to secure $710m from IMF after meeting key economic targets

ISLAMABAD: Pakistan is likely to secure $710 million from the International Monetary Fund (IMF) since it has met almost all the fiscal and monetary targets agreed with the global lender that is scheduled to review its financial performance early next month, Arab News reported on Wednesday, quoting economic experts. 

The IMF mission will begin its review under a $3 billion loan program from November 2. A favorable appraisal will pave the way for the approval of a second loan tranche of $710 million by the Fund’s executive board in December.

In July, the IMF approved a nine-month standby arrangement for Pakistan that amounted to $3 billion to support the country’s economic stabilization program and disbursed $1.2 billion as the first tranche. The development took place at a time when the South Asian nation of 241 million was struggling to bridge an external financing gap to avert sovereign debt default.

Dr. Khaqan Hassan Najeeb, senior economist and a former economic adviser to government, said the IMF review would cover the indicative targets, quantitative performance criteria and the structural benchmark for the first quarter performance of the economy.

“One can be hopeful since the targets on the fiscal side, especially the primary surplus, the targets on the energy side, especially the circular debt, and other targets on monetary side and net international reserves are all within the bounds that were agreed with the Fund,” he told Arab News.

He said the government would still face challenges since the external inflows had been slower than expected and it still needed to be seen how the next quarter targets were to be met. “The IMF review is of course very important to ensure Pakistan’s continued external inflows and microeconomic stability in the country,” he added.

Khurram Husain, a senior economic analyst, said the IMF could raise questions over the government’s primary fiscal numbers during the review since the authorities had delayed an increase in the gas prices and were artificially maintaining the exchange rate.

“A delay in raising the gas prices will have an impact on the primary fiscal numbers while the artificially maintained currency exchange rate will also be a cause of concern for the IMF team,” he told Arab News.

“The economy is currently under stress, and this will take time to improve,” he continued. Ali Khizer, a senior economist, said the government had met all quantitative targets for the IMF review, including tax collection, while the fiscal primary surplus of the first quarter was Rs417 billion as against the target of Rs87 billion. “Pakistan will comfortably clear the IMF review as all required actions have been taken, including a significant increase in gas prices,” he said.