Arrangement with the IMF: here are some key points
Wait is finally over for Pakistan, literally on the day the Extended Fund Facility (EFF) was scheduled to expire. Early morning on Friday, it was announced that Pakistan and the International Monetary Fund (IMF) reached a staff-level agreement on a fresh nine-month, $3 billion stand-by arrangement (SBA) with an Executive Board meeting expected by mid-July .
The news comes as a major breakthrough for Islamabad that ran from pillar to post to meet conditions of the Washington-based lender only to see an incessant delay on a successful completion of the ninth review. During this time, the public was alienated, heavy taxes were imposed, and questions were raised on Pakistan’s debt obligations.With a new SBA, which runs through July-March of fiscal year 2023-24,
here are some key points to keep in mind as Pakistan navigates the coming months.The IMF Executive Board is likely to meet by mid-July to formally approve the new arrangement with Pakistan.
This is not good news for short sellers. Majority of investors are likely to see this as a major positive and the KSE-100, a benchmark for market performance, is likely to get an upward push when the holidays are over.
The new facility also unlocks access to capital markets for Pakistan, opening up avenues for lending as it looks to finance its external funding gap. Pakistan has budgeted $1.5 billion as a Eurobond/International Sukuk for fiscal year 2023-24. This amount is likely to be dependent on the rates it is offered in the international market
Pakistan’s foreign exchange reserves, currently under $4 billion according to latest available data, are likely to get a boost as Saudi Arabia, UAE, and other bilateral partners also come through.
