Pakistan and an International Monetary financial (IMF) mission have made major strides toward an agreement at the staff level for an extended financial facility (EFF), the global lender announced on Friday.
The Pakistan Stock Exchange (PSX) gained 556.5 points shortly after the statement was released, closing at 75,670.97 points at 9:41 am, up from the previous close of 75,114.47 points.
After Islamabad last month concluded a short-term $3 billion program that helped prevent a sovereign debt default, the IMF has begun talks with Pakistan on a new loan program.
After arriving in Pakistan on May 13, an IMF team led by mission chief Nathan Porter wrapped up talks with the government on Thursday, the lender said in a statement.
Porter stated, “The mission and the authorities will continue virtually over the coming days in order to finalize discussions, including the financial support needed from the IMF and Pakistan’s bilateral and multilateral partners to underpin the authorities’ reform efforts.”
The statement went on to say, “The authorities’ reform program aims to move Pakistan from economic stabilization to strong, inclusive, and resilient growth.”
The Pakistani government “plans to continue to strengthen public finances to reduce vulnerabilities while scaling up spending for human capital, social protection, and climate resilience.” This is in addition to strengthening domestic income mobilization through fairer taxes.
Porter continued, “They also intend to maintain the viability of the energy sector, including reforms to lower the high cost of energy; continue progress towards low and stable inflation by appropriate monetary and exchange rate policies; improve public service provision through the restructuring and privatization of state-owned enterprises (SOEs); and promote private sector development by securing a level playing field for investment and stronger governance.”
Porter described the talks as “fruitful” and stated that the international lender and the Pakistani authorities will “continue policy discussions virtually over the coming days aiming to finalize discussions, including the financial support needed from Pakistan’s bilateral and multilateral partners and the IMF to underpin the authorities’ reform efforts.”
Pakistan is probably going to ask the IMF for further funding under the Resilience and Sustainability Trust in addition to requesting at least $6 billion under the new program.
The international lender has emphasized that the magnitude of the new loan package under negotiation is not as important as putting measures to revive Pakistan’s economy first.
The IMF had issued a warning earlier this month that there were still very substantial downside risks to the Pakistani economy ahead of the talks.
