Pakistan: Expected features of the IMF program

With the final round of talks underway between the incumbent government and the International Monetary Fund (IMF) team, consensus is being developed for a three-year economic and financial program.

With the Fund team scheduled to head off to its Washington-based headquarters on Friday (May 10, 2019), analysts cannot rule out an announcement as soon as today (Friday).

Analysts believe a USD 6-7bn bailout package may materialize, with key focus on upwards revision in energy (electricity and gas) tariffs together with withdrawal of subsidies and tax concessions to improve the fiscal deficit position as well as quarterly targets to shore up the NIR (Net International Reserves) so as to address the balance of payments crisis and support the foreign exchange reserves.

Prior to this, the government took various actions to close a deal with the IMF including allowing the Pakistani Rupee to depreciate by ~14% in FYTD against the USD in a bid to adjust the currency towards a REER of 100 and approve partial increase in gas and electricity tariffs.

Analysts have summarized key features of the IMF program and compared it to benchmarks under the last program along with its impact on the economy and sectors.

 

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