ISLAMABAD: The International Monetary Fund (IMF) and the Pakistani authorities made significant progress towards reaching a Staff Level Agreement (SLA) on a comprehensive economic policy and reform program that can be supported under an Extended Fund Facility (EFF).

At the request of the Pakistani authorities, an IMF team, led by Nathan Porter, the IMF’s Mission Chief to Pakistan, visited Islamabad during May 13-23, 2024, to discuss Pakistan’s plans for a home-grown economic programme that can be supported under the IMF’s EFF.

The talks concluded without reaching a staff level agreement as the IMF mission and the Pakistani authorities will continue policy discussions virtually over the coming days aiming to finalise discussions.

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At the end of the visit, Porter issued the following statement:

“Building on the economic stabilization achieved through the successful completion of the 2023 Stand-by Arrangement, the IMF and the Pakistani authorities made significant progress toward reaching a Staff Level Agreement (SLA) on a comprehensive economic policy and reform program that can be supported under an Extended Fund Facility (EFF).

“The authorities’ reform program aims to move Pakistan from economic stabilization to strong, inclusive, and resilient growth. To achieve this, the authorities plan to continue to strengthen public finances to reduce vulnerabilities by improving domestic revenue mobilization through fairer taxation while scaling up spending for human capital, social protection, and climate resilience; secure energy sector viability, including reforms to reduce the high cost of energy; continue progress towards low and stable inflation by appropriate monetary and exchange rate policies; improve public service provision through state-owned enterprise (SOE) restructuring and privatization; and promote private sector development, by securing a level-playing field for investment and stronger governance.

“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.

“The IMF team is grateful to the Pakistani authorities, private sector, and development partners for fruitful discussions and their hospitality throughout this mission.”

Reuters adds:

The IMF’s comments helped the benchmark share index scale a record high and breach the key 76,000 level. The index was last up 1.2%.

Adnan Sheikh, assistant vice president, research at Pak Kuwait Investment Company, attributed the rise to the IMF’s comment and the United Arab Emirates (UAE) promising investment.

“Despite the 90% run-up in dollar terms over the past year, The KSE 100 is trading at price-earnings ratio 4x, which is well below its average,” said Sheikh, adding that the ratio suggested that Pakistani equities might still have healthy room for further upside.

On Thursday, the UAE committed $10 billion to invest in promising economic sectors in Pakistan, without specifying the areas. The announcement came during Pakistani Prime Minister Shehbaz Sharif’s UAE visit.

Pakistan is likely to seek at least $6 billion under the new programme and request additional financing from the IMF under the Resilience and Sustainability Trust.

Ahead of the discussions, the IMF had warned that downside risks for the Pakistani economy remained exceptionally high.

“The authorities’ reform program aims to move Pakistan from economic stabilization to strong, inclusive, and resilient growth,” Porter added.

Copyright Business Recorder, 2024

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