The International Monetary Fund (IMF) Executive Board has approved the first review for Pakistan under the Stand-By Agreement (SBA) which is likely to lead to the release of a US$ 700 million tranche.
This will take the total disbursement by IMF under the SBA program to US$ 1.9 billion to Pakistan and will help support the foreign exchange reserves of the country.
According to Topline Securities, more dollar funding for Pakistan is likely from Bi-lateral, Multi-lateral, and other sources after IMF board approval. This will also facilitate rollovers, supporting foreign exchange reserves and bringing stability to the currency.
In its press release, the IMF stated that economic activity has stabilized, though the outlook remains challenging and contingent on the implementation of sound policies.
IMF has revised its forecast for a few macro indicators, as mentioned below:
- GDP Growth: IMF has revised its projected GDP growth from 2.5% to 2% for FY24. The report estimates Pakistan GDP to clock in at around 3 percent in FY24.
- Inflation: IMF expects inflation to remain elevated. However, with appropriately tight policies, it could decline to 18.5 percent (earlier 16.2 percent) by the end of June 2024, with an average inflation rate of 24 percent (earlier 26 percent) for FY24. This indicates a cut in the policy rate, which currently stands at 22 percent.
The report sees inflation to be at 17.5 percent by the end of June 2024, with an average inflation rate of 23 percent for FY24. Additionally, it anticipates a 700bps cut in the policy rate in 2024, reaching 15 percent by Dec-2024.
- Gross Reserves: IMF now expects gross reserves to be US$9.1bn by June 2024, up from the earlier estimate of US$8.9bn. The report sees reserves to be US$ 8-10 billion by June 2024.
- Current Account: IMF has also revised down its Current Account Deficit forecast to 1.6 percent of GDP (US$ 5.7 billion) from an earlier projection of 1.8 percent of GDP (US$ 6.4 billion) for FY24. The report estimates CAD to clock in at 1.1 percent of GDP (US$ 4 billion) in FY24.
