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Pakistan is required to meet several conditions set by the International Monetary Fund (IMF) in order to secure approval for its agenda this month. The country must demonstrate the proper functioning of the foreign exchange market, present a federal budget aligned with the lender’s objectives, and secure credible financing commitments to bridge the $6 billion gap.
Esther Perez Ruiz, the IMF’s resident representative for Pakistan, stated in an interview with Reuters that there is only enough time for one more IMF Board review before the $6.5 billion Extended Fund Facility (EFF) expires on June 30.
“To pave the way for a final review under the current EFF, it is essential to restore the proper functioning of the FX market, pass a FY24 Budget consistent with program objectives, and secure firm and credible financing commitments to close the $6 billion gap ahead of the Board,” Ruiz explained.
Regarding the IMF’s expectations for the budget for the fiscal year 2023-24, the representative emphasized the need to strike a balance between strengthening debt sustainability prospects and creating room for increased social spending.
While such measures would help alleviate inflationary pressures on Pakistan’s most vulnerable communities, the government still needs to identify spending and revenue-generating measures to achieve these goals.
To persuade the IMF to release funds, the government has implemented measures such as levying taxes, raising energy tariffs, reducing subsidies, and the central bank has increased policy interest rates to a record 21 percent.
Obtaining additional funds from the IMF is crucial for Pakistan to overcome the ongoing crisis, address supply shortages, and mitigate the risk of default before the upcoming elections later this year.
