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Country report: IMF expresses satisfaction over Pakistan’s SBA performance

  • Says all but one of 7 QPCs for end-September were met, and while ceiling on general government primary budget deficit was missed, deviation was minor and accounted for by technical factors
Published January 20, 2024

The International Monetary Fund (IMF) has expressed satisfaction with the Pakistani authorities’ performance under the $3-billion, nine-month Stand-By Arrangement (SBA).

“Overall performance against end-September quantitative performance criteria (QPCs), Indicative Targets (ITs), and Structural Benchmarks (SBs) under the SBA was satisfactory,” the Washington-based lender said in its detailed staff country report on Pakistan released on Friday.

The IMF said that by the end-September 2023, the Pakistani authorities met six quantitative Performance Criteria (PCs): “floors on: (i) net international reserves of the State Bank of Pakistan (SBP); and (ii) targeted cash transfers spending (BISP); and the ceilings on: (iii) the SBP’s FX swap/forward book; (iv) net domestic assets of the SBP; (v) net government budgetary borrowing from the SBP; and (vi) the amount of government guarantees.”

“They also met the two continuous PCs on: (i) zero new flow of SBP credit to the government; and (ii) zero external public payment arrears,” it said.

Macroeconomic conditions ‘have generally improved, but outlook remains challenging’, says IMF

However, the IMF noted that the ceiling on the general government primary budget deficit was missed by a small margin, with this deviation accounted for by technical factors (exchange rate valuation of external financing flows).

Regarding the ITs, the Pakistani authorities met three end-September ITs: “the floors (i) on net tax revenue collected by Federal Board of Revenue (FBR), and (ii) budgetary health and education spending; and the ceiling on (iii) net accumulation of tax refund arrears.

“However, the IT on power sector payment arrears was missed by a large margin, mostly due to under-recoveries in August as well as a lower-than-anticipated tariff set in the annual rebasing,” read the report.

The IMF said that the structural benchmarks (SBs) on the notification of the FY24 annual rebasing, and the compilation and dissemination of quarterly national accounts were met.

“The continuous SB on the average premium between the interbank and open market exchange rate was missed from mid-August to early-September, but subsequent structural reforms in the EC sector should enhance governance and transparency and reduce the risk of future deviations,” it said.

The global lender noted that the authorities made strong progress on the end-November SB on improving SOE (State-Owned Entities) governance, “including (i) the operationalization of the SOE Act into a policy that clarifies ownership arrangements and roles; and (ii) significant progress, via ordinance, on amending the Acts of four selected SOEs to make the new SOE Act fully applicable, although final amendments remain to be completed via updated ordinance and/or adopted by parliament.”

Last year in June, the IMF staff and Pakistani authorities reached an agreement on policies to be supported by a SBA.

The staff-level agreement was seen as a massive positive for the government and the economy reeling from crisis, and extended Pakistan’s commitment with the lender well into the second half of fiscal year 2023-24. It was also an upgrade from the earlier expectation that the country would receive $1.1 billion after the ninth review.

Subsequent to the development and the Executive Board approval in July, Pakistan also saw a successful staff-level agreement on the first review in November. The IMF Executive Board then approved the disbursement of the next tranche of the SBA in January.

Earlier this week, the State Bank of Pakistan also confirmed that it received SDR 528 million (equivalent to $705.6 million) in value from the IMF following successful completion of the first review by the Executive Board of IMF under SBA.


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