By Ashraf Wani/Shams Abbasi
ISLAMABAD, Aug 13 (APP): The recent Stand-By Agreement (SBA) signed between Pakistan and the International Monetary Fund (IMF) has proven to be a crucial lifeline, staving off the impending economic crisis that had cast a shadow over the country.
The accord, inked in the second week of July, has not only halted the alarming economic erosion but has also paved the way towards stabilization and potential growth.
However, the continuation of economic policies and structural reforms was vital to achieve sustainability.
The nine-month $3 billion agreement with IMF is aimed at supporting immediate efforts to stabilize the economy and guard against shocks while creating the space for social and development spending to help the people of Pakistan.
This infusion serves a dual purpose, providing immediate support to stabilize the economy against external shocks while concurrently carving out a fiscal space for social and developmental expenditures that will directly benefit the people of Pakistan.
While the IMF deal has offered a much-needed reprieve, economic experts emphasize that its true value lies in its function as a catalyst for fiscal discipline.
“It is encouraging to have deal with the IMF, but fiscal discipline is more important,” former Finance Minister, Dr. Hafeez Ahmed Pasha told APP.
He however contended that the accord is but a foundation and the pivotal task of maintaining fiscal responsibility remains the cornerstone for steering the nation toward sustainable economic growth.
“Pakistan had twenty-two programs with the IMF. However, their implementation and maintaining fiscal discipline were always vital to bring about structural reforms,” Pasha said also highlighting the importance of long-term planning for sustainable economic development.
The far-reaching impact of this agreement is manifested across various sectors. The restoration of investor and business confidence has breathed fresh life into the economy, creating a favorable climate for increased investments.
President Pakistan Federation of Chambers of Commerce and Industry (FPCCI), Irfan Iqbal Shaikh, predicts a surge in foreign investor confidence and an overall enhancement of market sentiment, not only revitalizing Pakistan’s internal landscape but also augmenting its external profile.
Swiftly following the accord’s approval, the foreign exchange reserves strengthened as Saudi Arabia and the United Arab Emirates deposited $2 and $1 billion respectively, lifting the reserves up to around $13 billion from a very low.
This timely injection of foreign exchange has averted a potential crisis triggered by shortages of essential imports like fuel, food, and medicines.
For Prime Minister Shehbaz Sharif, the SBA signifies a pivotal stride towards his coalition government’s overarching mission of stabilizing the economy and ensuring macroeconomic equilibrium.
Meanwhile, former Finance Minister Senator Mohammad Ishaq Dar lauded the agreement as a promising trajectory toward economic stabilization, an assertion backed by the country’s recovering stock exchange, which had surged beyond the 48,000-point benchmark.
Notably, global rating agency Fitch Ratings has upgraded Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC-‘, reflecting a positive trajectory in the nation’s economic condition. The significance of this endorsement cannot be understated, signaling improved confidence from international financial quarters.
Abid Sulhari, Executive Director, Sustainable Development Policy Institute (SDPI) underscores the deal’s indispensability in revitalizing the economy.
“The agreement not only facilitates ongoing support from bilateral and multilateral partners but also carries the potential for a robust economic revival, contingent upon an unwavering commitment to fiscal discipline,” he points out.
As the nation stands at a crossroads, critical policy implementations loom large, promising to reshape both domestic and external economic landscapes. Alongside fiscal discipline, the continuation of well-calibrated economic policies and sustained political stability are pivotal for fostering long-term economic sustainability.
Pakistan finds itself navigating through challenging times, grappling with persistent inflation projected to average at 21 percent for the current fiscal year (2023-24). A recent monetary policy announcement by the nation’s central bank has maintained the key interest rate at 22 percent, with a gradual decline in inflation anticipated during months ahead.
It is worth noting that, to date, the IMF has disbursed $1.2 billion to the State Bank of Pakistan (SBP) as part of the agreed-upon $3 billion SBA. The remaining $1.8 billion is contingent on successful reviews scheduled for November 2023 and February 2024, underscoring the ongoing partnership and the need for sustained progress.
No doubt, the IMF agreement has undeniably rescued Pakistan from the precipice of economic crisis, heralding a renewed sense of optimism and hope. While the financial injection from the IMF is a pivotal lifeline as the experts assert that a nation’s journey toward economic stability hinges on its commitment to fiscal responsibility, pragmatic policy implementations and political cohesion.
As Pakistan charts a course through challenging economic terrain, the hard-fought gains secured through this accord must be met with an unwavering resolve to ensure sustainable growth and prosperity.
Since the country is passing through hard times, maintaining economic growth and steering the country out of turmoil, need to be the top priority of upcoming governments by embarking on prudent policies and stringent measures to bring in a viable fiscal discipline.