Pakistan was hoping to get an executive approval from the International Monetary Fund (IMF) on the $3 billion Standby Agreement (SBA). But its exclusion from the schedule of Executive Board until mid-December amounts to a serious economic challenge. The staff level agreement reached at on November 15 was a very hopeful sign that executive approval will follow soon. But the delay is now raising suspicions on what IMF plans regarding the country might be. It is also being speculated that until the elections and the formation of the elected government, IMF will not approve the arrangement.
This delay has put in jeopardy the $700 million tranche disbursement that Pakistan was awaiting anxiously. Amidst economic challenges, this first disbursement would have helped ensure a certain level of economic stability. Delay in completion of first review will push the deadline of the second review (April 2024, originally) even further. This is a bleak picture for the country’s fiscal health. The dollar deficit will further grow, with negative fallouts for all sectors of economy. Pakistan has been relying on IMF support to address balance of payments challenges and implement economic reforms.
The staff level meetings expressed satisfaction with Pakistan’s performance and compliance with IMF mechanisms. Given that, the delay in executive approval is unexpected. Hoping to appease IMF, the government had to implement unwelcomed and difficult decisions, especially in regards to fuel prices. People have been bearing the burden of unprecedented inflation in recent months. The coming 2-3 months are very crucial because the country is headed towards general elections. The conduct of elections, itself, requires a degree of economic certainty.
The delay in approval may affect the government’s ability to meet its financial obligations and implement crucial policy measures. The pressure on Pakistani rupee will grow and a wave of economic difficulty will sweep in again. These anticipated challenges underscore the importance of timely access to international financial assistance for Pakistan’s economic resilience.