Frequently Asked Questions on Pakistan

Last Updated: July 13, 2023

The Executive Board of the International Monetary Fund (IMF) approved a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of SDR2,250 million (about $3 billion, or 111 percent of quota) to support the authorities’ economic stabilization program.

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What are the main objectives of the Stand-By Arrangement (SBA) and what are the policy priorities?

The program aims to stabilize the economy and address the needs of the Pakistani people by providing an anchor for policies to address domestic and external imbalances, and a framework for financial support from multilateral and bilateral partners. Policy efforts under the SBA-supported program center on the careful implementation of the FY24 budget; restoring a market determined exchange rate to absorb external pressures and eliminate FX shortages; and appropriately tight monetary policy aimed at disinflation. Policy actions also include continued reform efforts to improve energy sector viability, strengthen State Owned Enterprises (SOEs) and governance, and build climate resilience. Steadfast policy implementation is critical for Pakistan to address its large financing needs, support the most vulnerable, especially from high inflation.

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How will the SBA help the Pakistani people and protect the most vulnerable?

The new SBA protects the most vulnerable by further increasing the FY24 Benazir Income Support Program (BISP) envelope to maintain the generosity of BISP programs in real terms. The SBA also increases development spending to enhance infrastructure and climate resilience. Additionally, policy actions to place inflation on a downward path towards the SBP’s target will help protect the purchasing power of the most vulnerable through continued monetary policy tightening and the easing of price pressures caused by the shortage of basic goods following the removal of import restrictions and FX rationing.

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What are the key policy recommendations to increase revenue mobilization?

The FY24 budget advances a primary surplus of around 0.4 percent of GDP by taking some steps to broaden the tax base and increase tax collection from undertaxed sectors, including the construction and agriculture sectors, while ensuring space to strengthen support for the vulnerable through the BISP program. Going forward, the authorities plan to continue strengthening revenue administration efforts, together with the support from the World Bank, the Asian Development Bank, and the IMF. Work on creating a Compliance Risk Management framework in FY23 will enable improvements in tax compliance in FY24.

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How will the SBA contribute to building climate resilience?

Pakistan’s high vulnerability to natural disasters underscores the importance of climate adaptation policies. The authorities plan to accelerate critical adaptation measures, including strengthening flood safety projects and transforming the agri-food system. They also working on an action plan to enhance the investment efficiency of climate-related projects for cabinet approval by year end. Over the medium term, the National Adaptation Plan, to be developed with support from UNEP, would also help enhance policy efforts towards the resilience of particularly vulnerable and exposed sectors, including agriculture, power, and transport infrastructure.