What Pakistan needs to do under the IMF program

The logo of the International Monetary Fund is visible on its building, April 5, 2021, in Washington. (AP/File)
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Updated 30 June 2023
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What Pakistan needs to do under the IMF program

  • IMF and Pakistan have struck $3 billion bailout deal under a stand-by arrangement 
  • Deal not under Pakistan’s Extended Fund Facility program country entered in 2019

KARACHI: The International Monetary Fund and Pakistan have struck a staff-level agreement for the provision on $3 billion in bailout funds under a stand-by arrangement (SBA).

The deal comes under an SBA instead of Pakistan’s Extended Fund Facility (EFF) program that the country entered in 2019 and which was set to expire on Friday. The IMF said the SBA “builds on” efforts under the EFF.

The IMF board will meet in mid-July to approve the staff-level agreement.

Here are some key facts about the agreement:

CHALLENGING REFORMS

- Pakistan’s power sector has been specifically mentioned by the IMF, which called for a “timely” rebasing of tariffs to ensure that costs are recovered. This means hiking prices for consumers despite already record high inflation in what is an election year.

- Pakistan’s central bank should withdraw import restrictions put in place to control external payments in the face of fast-depleting foreign exchange reserves, but which had throttled economic growth. Reserves stand at $3.5 billion, barely enough to cover a month’s worth of controlled imports.

- The country has been asked to commit fully to a market determined exchange rate, remove controls and eliminate multiple exchange rate practices in different markets, even as the rupee has depreciated to record lows in recent weeks.

- The central bank has also been asked to remain “proactive” to reduce inflation. The bank paused its rate hike process at a scheduled meeting this month. Days later, it implemented an off-cycle 100 basis point hike to take its policy rate to 22 percent on the demand of the IMF.

- Losses in state-owned enterprises, which are burning a hole in government finances, will need stronger governance. The government has budgeted only about 15 billion Pakistani rupees ($52.42 million) in receipts from a stalled privatization process.

MORE FUNDING

- Despite the larger than expected IMF bailout, the agreement stressed that Pakistan will have to continue to mobilize multilateral and bilateral financial support.

- Saudi Arabia and the United Arab Emirates have pledged a combined $3 billion that is expected to come in now that the IMF deal has materialized. Debt rollovers from China, Pakistan’s largest creditor, will also be key.

- Ensuring the materialization and building of a spending framework for pledges secured earlier this year in an international donor conference will be key. Over $9 billion in climate-related pledges were made to help Pakistan recover from devastating floods in 2022.

- Pakistan needs $22 billion to fund its external payment obligations, including international debt servicing, in the financial year 2024, that starts on Saturday, July 1, and ends on June 30, 2024.

STAYING THE COURSE

- The IMF has stressed that it is important that the revised annual budget is executed as planned, and the authorities resist pressures for unbudgeted spending or tax exemptions in the period ahead.

- The agreement states that the full and timely implementation of the program will be critical for its success in light of the difficult challenges.

- The fund has called on Pakistan for “steadfast policy implementation” and “fiscal discipline” to overcome its current challenges, which include record high inflation, a gaping fiscal deficit and building up low reserves. 

($1 = 286.1500 Pakistani rupees) 


Pakistan killed over 80 militants in strikes on TTP camps in Afghanistan — official

Updated 29 min 55 sec ago
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Pakistan killed over 80 militants in strikes on TTP camps in Afghanistan — official

  • Saturday’s airstrikes followed a series of attacks inside Pakistan amid a surge in militancy
  • The Afghan Taliban authorities accuse Pakistani forces of killing civilians in the airstrikes

ISLAMABAD: Pakistan’s airstrikes in Afghanistan destroyed seven Tehreek-e-Taliban Pakistan (TTP) camps and killed over 80 militants, a Pakistani security official said on Sunday, with the Afghan Taliban accusing Pakistani forces of killing civilians in the assault.

Saturday’s airstrikes followed a series of attacks inside Pakistan amid a surge in militancy. Authorities say the attacks, particularly in Khyber Pakhtunkhwa province and the Pakistani capital of Islamabad, were carried out by the TTP and allied groups that Islamabad alleges are operating from sanctuaries in Afghanistan. Kabul denies this.

According to Pakistan’s information ministry, recent incidents included a suicide bombing at a Shiite mosque in Islamabad, separate attacks in Bajaur and Bannu, and another recent incident in Bannu during the holy month of Ramadan, which started earlier this week. The government said it had “conclusive evidence” linking the attacks to militants directed by leadership based in Afghanistan.

“Last night, Pakistan’s intelligence-based air strikes destroyed seven centers of Fitna Al-Khawarij TTP in three provinces of Nangarhar, Paktika and Khost, in which more than eighty Khawarij (TTP militants) have been confirmed killed, while more are expected,” a Pakistani security official, who spoke on condition of anonymity, told Arab News.

An earlier statement from Pakistan’s information ministry said the targets included a camp of a Daesh regional affiliate, the Islamic State Khorasan Province (ISKP), which claimed a suicide bombing at an Islamabad Shiite mosque that killed 32 people this month.

In an X post, Afghan government spokesperson Zabihullah Mujahid said Pakistani forces had violated Afghan territory.

“Pakistani special military circles have once again trespassed into Afghan territory,” Mujahid said. “Last night, they bombed our civilian compatriots in Nangarhar and Paktika provinces, martyring and wounding dozens of people, including women and children.”
 
The Afghan Taliban’s claims of civilian casualties could not be independently verified. Pakistan did not immediately comment on the allegation that civilians had been killed in the strikes.

In a post on X, Afghanistan’s foreign ministry said it had summoned Pakistan’s charge d’affaires to Afghanistan Ubaid-ur-Rehman Nizamani and lodged protest through a formal démarche in response to the Pakistani military strikes.

“IEA-MoFA (The Islamic Emirate of Afghanistan’s Ministry of Foreign Affairs) vehemently condemns the violation of Afghanistan’s airspace and the targeting of civilians, describing it as a flagrant breach of Afghanistan’s territorial integrity & a provocative action,” it said in a statement.

“The Pakistani side was also categorically informed that safeguarding Afghanistan’s territorial integrity is the religious responsibility of the Islamic Emirate of Afghanistan; henceforth, the responsibility for any adverse consequences of such actions will rest with the opposing side.”

Tensions between Islamabad and Kabul have escalated since the Afghan Taliban returned to power in 2021. Pakistan says cross-border militant attacks have increased since then and has accused the Taliban of failing to honor commitments under the 2020 Doha Agreement to prevent Afghan soil from being used for attacks against other countries. The Taliban deny allowing such activity and have previously rejected similar accusations.

Saturday’s exchange of accusations marks one of the most direct confrontations between the two neighbors in recent months and risks further straining already fragile ties along the volatile border.