The IMF New Stand by Arrangement Program for Pakistan

The IMF New Stand  by Arrangement Program for Pakistan

Pakistan's first deal with the IMF was in 1958. Till now, Pakistan has completed 23 programs with the IMF. The Standard of the IMF is fixed for all countries. IMF provides recommendations for better governance removing corruption and many more.

IMF New Stand by Arrangement Program

VARIOUS PROGRAMS OF THE IMF

1 Structural adjustment program

2 Extended fund facility

3 Stand by arrangement

THE MOST RECENT PROGRAM

This program is called SBA (stand-by arrangement. It is for a short time. For nine months till the end of March 2024. This program will be subject to reviews every three months, The Total amount of stand-by arrangement is 3 billion dollars. Before this, Pakistan accomplished an extended fund facility, a long-term project for 4 to 6 years. How much loan is expected by Pakistan in March 2024? It is around 1 billion dollars. What is the new IMF agreement with Pakistan? It is a standby agreement (SBA) apart from the other two agreements.

POSITIVE IMPACTS OF STANDBY ARRANGEMENT (SBA)

1 Giving loans to Pakistan is a green signal to other lenders such as Paris Club, UAE, Saudi Arab, USA, and China. All of them will be motivated to provide loans to Pakistan.

2 Second impact is the delay of Pakistan’s default for a complete 9 months. Our net revenue in the 2023 budget was around 7000 billion PKR (In round figures) and spending around 14000 billion PKR (in round figures). Debt servicing is ditto around 7000 billion PKR (in round figures). It simply means Pakistan has nothing then after debt spending. So, the loan was a must to run the affairs of the country.

3 New programs have been giving confidence in the market, the stock exchange performed well and people started investing again

NEGATIVE IMPACTS OF STANDBY ARRANGEMENT(SBA)

1 The first negative impact was the mini budget which bypassed the regular budget prepared by the parliament. It is an attack on the sovereignty of Pakistan.

2 Increment in the interest rate, means people will start taking money from the banks. Thus, lowering businesses and investment and finally GDP. It ditto leads to unemployment and poverty.

3 Increment in the power tariff such as electricity rates created chaos and anger among the people as the inflation rate was already 38 percent.

4 Another precarious was removing import restrictions. In 2022 our imports were around 66 billion dollars and exports were 26 billion dollars. A trade deficit means Pakistan has to spend dollars abroad. Resultantly, Pakistan's trade deficit will increase in the time coming ahead.

5 Freedom of the dollar market which means don’t stabilize the dollar market artificially rather, the market will determine the rate. It will lead the dollar to go higher.

6 Import items will further soar the inflation. Some items that must be exported including fuel oil, and edible oil will be available at higher prices within the country.