The IMF Personnel Level Agreement (SLA) with the Pakistani authorities in the first review of the Extended Fund (EFF) installation of 37 months, while introducing a new 28 -month agreement under the resilience and sustainability center (RSF), totaling approximately $ 1.3 billion is a significant development for the transition to the growth of macroeconomic stability in Pakistan.
This agreement, waiting for the approval of the IMF Executive Board, will grant Pakistan access to around $ 1 billion under the EFF, which raises the total disbursements to approximately $ 2 billion. The RSF aims to support the country’s efforts to develop resilience to natural disasters, improve budget planning and investment for climatic adaptation, improve water resources management, strengthening of climatic information systems and aligning the reforms of the energy sector with mitigation objectives.
In the last 18 months, Pakistan has advanced significantly in the restoration of macroeconomic stability and the reconstruction of confidence despite a challenging global environment, a distant deviation from a scenario close to a point close to only 18 months 18 months ago. Economic growth is still moderate, but inflation has decreased to its lowest level since 2015.
The continuation of the program should unlock more sources of external financing, which can be used for growth. The economy now needs growth that needs to be driven by export, instead of consumption. The RSF agreement underlines the recognition of the IMF of the critical need for climate resilience in Pakistan.
By focusing on improving the country’s ability to resist natural disasters and promoting sustainable development, the RSF aims to address immediate challenges and long term raised by climate change. This development follows the IMF approval of a loan of $ 7 billion for Pakistan in September 2024, which intended to support the economy in difficulties in the country.
The new SLA and RSF agreement is based on this base, which reflects the continuous collaboration between Pakistan and the IMF to guarantee economic stability and resilience. The economy continues to be tied along the low growth path, and growth is largely unlocked through more investments, particularly in export -oriented areas, while allowing a transition far from consumption.
Avoiding the IMF program in the future can only be done through this approach, and not another high growth stream based on the capital borrowed, only to fail in a matter of few sectors.
Originally published in the news
