IMF agreement brings relief, but economic challenges persist, say experts

Economic experts welcomed Pakistan’s latest breakthrough with the International Monetary Fund (IMF), as the Soth Asian country secured a staff-level agreement on the first review of the 37-month, $7 billion Extended Fund Facility (EFF).

The agreement, pending the IMF’s board approval, would enable the cash-starved country to access a $1 billion disbursement.

Moreover, the Washington-based lender and Pakistan also signed a new 28-month arrangement under the Resilience and Sustainability Facility (RSF), amounting to $1.3 billion.

Markets responded positively to the development, as the Pakistan Stock Exchange (PSX) benchmark KSE-100 Index surged by nearly 1,200 points to settle at 117,772.31 level on Wednesday.

“Pakistan has managed to get this agreement within 10-11 days of the completion of the IMF team visit to Pakistan from Feb 24 to Mar 14, 2025, and there seems to be no strings attached to board approval i.e. completion of any prior actions or seeking financing assurances etc,” Shankar Talreja of Topline Securities said in a note.

In previous agreements, IMF board approval has remained contingent on securing financing assurance from Pakistan’s development and bilateral partners.

“Since the IMF board approves the review, Pakistan will receive $1 billion from IMF, which we believe will also result in inflows from other multilateral/bilateral funds, as mentioned by the Governor State Bank of Pakistan (SBP) in last analyst briefing.

“The board approval is likely in the next few weeks,” he said.

The government had been awaiting the IMF agreement on the first review of the EFF, ahead of Pakistan’s annual budget, which is usually presented in June.

A positive step, but challenges persist

Talking to Business Recorder, Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company Limited, termed the development as “a positive for Pakistan”.

“The agreement keeps the economy on track while improving certainty of balance of payment and economic reforms,” he added.

On the other hand, others cautioned that Pakistan must remain committed to the programme to ensure sustainable economic growth.

“The economy is expected to remain on track until we don’t deviate from the IMF conditions,” said Saad Hanif, Head of Research at Ismail Iqbal Securities.

Hanif noted that despite economic improvement, the country’s foreign exchange reserves remain low.

“We need to strengthen our reserves, as achieving a higher economic growth, without proper planning, may lead to another balance of payment crisis as seen in the past,” he said.

The market expert also called for revenue diversification, noting that Pakistan remains heavily dependent on its textile sector.

He also urged authorities to come up with conducive policies that promote industrialization.

As per the latest figures issued by the Pakistan Bureau of Statistics (PBS), Pakistan’s industrial growth contracted by 0.18% during the second quarter of fiscal year 2024-25.