Pakistan may need another International Monetary Fund (IMF) program after the expiration of the $3 billion standby arrangement approved earlier this month to ensure economic stability, the global lender said in a report released on Tuesday.
Pakistan faced major political and financial crises that intensified in the second quarter of 2022 and hit its fragile economy, making experts warn of a possible default amid a severe dollar liquidity crunch and rapidly depreciating national currency.
The government continued to strive for the resumption of a stalled IMF loan program which materialized only recently, providing a much-needed economic relief to the country.
However, the IMF described the incomplete and uneven policy implementation under its Extended Fund Facility between 2019 and 2023 as a “missed opportunity” to set the economy on a solid footing, adding the new arrangement was meant to reduce near-term uncertainty and risks.
“Resolving Pakistan’s structural challenges, including long-term [balance of payment] pressures, will require continued adjustment and creditor support beyond the program period,” it said at the outset of the report. “A possible successor arrangement could help anchor the policy adjustment needed to restore Pakistan’s medium-term viability and capacity to repay.”
The report acknowledged that the country’s economic challenges were complex and multifaceted, adding the risks continued to remain “exceptionally high” for Pakistan.
“Addressing them requires steadfast implementation of agreed policies, as well as continued financial support from external partners,” it added. “Consistent and decisive implementation of program agreements will be essential to reduce risks and maintain macroeconomic stability.”
The IMF assessment comes at about the same time when Pakistan’s finance minister Ishaq Dar told the nation the country’s economy was in “safe zone” after a substantial reduction in current account deficit which stood at $2.56 billion at the end of the last fiscal year.
