An International Monetary Fund (IMF) mission and Pakistan have made significant strides towards reaching a staff-level agreement for an extended fund facility (EFF), the global lender announced on Friday.
Following the IMF’s statement, the Pakistan Stock Exchange (PSX) responded positively, with the index gaining 556.5 points, rising to 75,670.97 points from the previous close of 75,114.47 at 9:41 am.
The IMF has initiated talks with Pakistan regarding a new loan program after Islamabad completed a short-term $3 billion arrangement last month, which helped avert a sovereign debt default.
An IMF team, led by mission chief Nathan Porter, concluded discussions with Pakistani authorities on Thursday, after their arrival in Pakistan on May 13, according to an IMF statement.
“The mission and the authorities will continue policy discussions virtually over the coming days, aiming to finalize discussions, including the financial support needed to underpin the authorities’ reform efforts from the IMF and Pakistan’s bilateral and multilateral partners,” Porter stated.
The statement further elaborated that Pakistan’s reform program is designed to transition the country from economic stabilization to strong, inclusive, and resilient growth. The program focuses on strengthening public finances by enhancing domestic revenue through fair taxation and increasing spending on human capital, social protection, and climate resilience.
The authorities also aim to ensure the viability of the energy sector by implementing reforms to reduce high energy costs, maintain low and stable inflation through appropriate monetary and exchange rate policies, improve public service provision via the restructuring and privatization of state-owned enterprises (SOEs), and promote private sector development by creating a level playing field for investment and enhancing governance, Porter added.
Describing the discussions as “fruitful,” Porter indicated that the IMF and Pakistani authorities will continue policy discussions virtually to finalize the details, including financial support from the IMF and Pakistan’s bilateral and multilateral partners.
Pakistan is expected to seek at least $6 billion under the new program and may request additional financing from the IMF under the Resilience and Sustainability Trust.
The IMF has stressed that prioritizing reforms to revitalize the Pakistani economy is more crucial than the size of the new loan package being negotiated.
Earlier this month, the IMF warned that downside risks for the Pakistani economy remained exceptionally high, highlighting the importance of these ongoing discussions.
