By Gibran Naiyyar Peshimam and Asif Shahzad
ISLAMABAD (Reuters) – Pakistan’s benchmark share index hit a life-time high in opening trade on Thursday, hours after the International Monetary Fund’s board approved a long-awaited $7 billion bailout deal for the struggling economy.
The IMF said the new programme will require “sound policies and reforms” to strengthen macroeconomic stability and address structural challenges alongside “continued strong financial support from Pakistan’s development and bilateral partners”.
An immediate disbursement of about $1 billion will take place, an IMF statement said.
Pakistan’s stock benchmark extended gains in early trade and was last up 0.8% at a new high of 82,905.73.
“We will need to take difficult decisions if we want to make it our last programme with the IMF,” Pakistan’s junior finance minister, Ali Pervaiz Malik, told local Geo News TV on Thursday.
Prime Minister Shehbaz Sharif thanked the IMF managing director Kristalina Georgieva and said the country would continue to implement the tough economic reforms agenda, he told reporters in New York on he sidelines of UN general assembly on Wednesday.
Georgieva congratulated Pakistan for moving forward with “home-defined” reforms.
“The economy is on the sound path,” she told reporters after the board meeting. “Growth is up and inflation is down,” she said.
Islamabad had been working on implementing conditions, which Sharif had previously called “strict” to secure the 37-month loan programme agreed in July.
REFORMS AND RISKS
The IMF said in its statement that Pakistan had taken key steps to restore economic stability with consistent policy implementation under the 2023-24 standby arrangement.
It added that growth had rebounded to 2.4% and inflation has receded significantly, falling to single digits, amid appropriately tight fiscal and monetary policies.
A contained current account and calm foreign exchange market conditions have allowed the rebuilding of reserve buffers, and the central bank of Pakistan has been able to cut the policy rate by a total of 450 bps since June, the statement said.
Despite this progress, it said, Pakistan’s vulnerabilities and structural challenges remain formidable, adding that the tax base remains too narrow.
“Without a concerted adjustment and reform effort, Pakistan risks falling further behind its peers,” it warned.
Pakistan has been struggling with boom-and-bust economic cycles for decades, leading to more than 20 IMF bailouts since 1958.
The South Asian country is the IMF’s fifth-largest debtor, owing the Fund $6.28 billion as of July 11, according to the lender’s data.
The latest economic crisis has been the most prolonged and has seen Pakistan facing its highest-ever inflation, pushing the country to the brink of a sovereign default last summer.
Inflation has since eased and credit ratings agency Moody’s (NYSE:) has upgraded Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to ‘Caa2’ from ‘Caa3’, citing improving macroeconomic conditions and moderately better government liquidity and external positions.
