The International Monetary Fund (IMF) has revised its projection for Pakistan’s external financing needs for the fiscal year 2023-24 to $24.965 billion, or about 7.1 percent of GDP, the lender said in its report “First Review under the Stand-By Arrangement” released this month.
Earlier this month, the IMF board approved a roughly $700 million loan for Pakistan under a $3 billion bailout, bringing total disbursements under a Standby Arrangement (SBA) signed last year to about $1.9 billion.
The South Asian country is operating under a caretaker government and the IMF loan program, approved in July, helped avert a sovereign debt default.
Ahead of the bailout, Pakistan had to undertake a slew of measures demanded by the IMF, including revising its budget, a hike in its benchmark interest rate, and increases in electricity and natural gas prices.
In its report entitled “First Review under the Stand-By Arrangement,” the IMF revised its projection for Pakistan’s external financing for FY 2023-24 to $24.965 billion, which is about 7.1 percent of Pakistan’s GDP and marks a decrease from an earlier estimate of $28.361 billion or 8.1 percent of GDP.
“Following the 2022 floods and the acute financial pressures earlier in the year, economic activity has stabilized and inflation has begun to gradually decline on the back of strong policy adjustment,” the report said.
“External pressures have eased somewhat since June, and the SBP has taken advantage of renewed inflows to begin rebuilding foreign exchange (FX) reserves.”
Fiscal performance had also improved, the IMF said, with the general government achieving a primary surplus in FY24Q1.
“Despite this welcome progress, the outlook is still challenging, and downside risks remain exceptionally high,” the report added.
Under the bailout deal, the IMF got Pakistan to raise $1.34 billion in new taxation to meet fiscal adjustments. The measures fueled all-time high inflation of 38 percent year-on-year in May, which is still hovering above 30 percent.
The fund said that despite elevated inflation, “with appropriately tight policy” it could fall to 18.5 percent by end-June. It added the exchange rate has been “broadly stable.”
