IMF says ‘significant progress’ in talks with Pakistan on new bailout package

• The IMF issues an end-of-mission statement on economic policies.
• The IMF has started talks with Pakistan on a new loan program.
• Islamabad is expected to seek at least $6 billion under the EFF.

ISLAMABAD: The International Monetary Fund (IMF) on Thursday said “significant progress” has been made during talks with Pakistan to reach a staff-level agreement on an expanded fund facility.

An IMF team, led by Nathan Porter, the IMF’s chief of mission to Pakistan, visited Islamabad on 13-23 May 2024 to discuss the country’s plans for a domestic economic program that can be supported under the expanded facility of the IMF (EFF ).

The visit took place at the request of Islamabad.

“The mission and the authorities will continue policy discussions substantially in the coming days with the aim of concluding discussions, including the financial support needed to support the authorities’ reform efforts from the IMF and Pakistan’s bilateral and multilateral partners,” he said. Porter said in a statement.

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

Before the talks, the IMF had warned that downside risks to Pakistan’s economy remained extremely high.

The official said that based on the economic stabilization achieved through the successful completion of the 2023 Stand-by Arrangement, the IMF and the Pakistani authorities have made significant progress towards reaching a Staff Level Agreement (SLA) on a comprehensive economic policy and reform program that may be supported by an EFF.

“The authorities’ reform agenda aims to move Pakistan from economic stabilization to strong, inclusive and resilient growth. To achieve this, the authorities plan to continue strengthening public finances to reduce vulnerabilities, improving domestic revenue mobilization through fairer taxation, while increasing spending on human capital, social protection and climate resilience. ensuring the sustainability of the energy sector, including reforms to reduce high energy costs; Continue progress towards low and stable inflation with appropriate monetary and exchange rate policies; Improve public service delivery through the restructuring and privatization of state-owned enterprises (SOEs); and promote private sector development, ensuring a level playing field for investment and stronger governance.”

Porter also praised the Pakistani authorities, private sector and development partners for constructive discussions throughout this mission.

Uptrend in PSX

The lender’s comments helped the benchmark KSE-100 stock index climb higher and break the key level of 76,000. The index last rose 1.2%.

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

“Despite a 90% increase in dollar terms in the past year, the KSE-100 is trading at a price-to-earnings ratio of 4x, which is well below its average,” Sheikh said, adding that the ratio suggests that Pakistani stocks they may still have healthy room for further upside.

On Thursday, the United Arab Emirates pledged $10 billion to invest in promising economic sectors in Pakistan, without specifying the areas. The announcement was made during Prime Minister Shehbaz Sharif’s visit to the United Arab Emirates.