IMF Review in Focus: Current Account Poised for Breakeven to Surplus

Staff Report:

The IMF team is expected to visit Pakistan in mid-February 2025, according to news reports, to assess the country’s performance as part of their first review scheduled for March 15, 2025. The ongoing Extended Fund Facility (EFF) program, totaling $7 billion, comprises six semiannual reviews set to conclude on September 15, 2027.

The release of the next tranche, approximately $1 billion (or SDR 760 million), is contingent on meeting various criteria outlined by the IMF. These include Quantitative Performance Criteria (QPC), Continuous Performance Criteria, Indicative Targets, and Structural Benchmarks.Pakistan Strategy – 2024: Good year for IPO’s; Companies raised Rs8.4bn for 7 IPOs, highest amount in last 3-Years

The IMF has added seven QPCs to the program, details of which indicate that Pakistan is likely to meet most of these criteria. Key areas such as Net International Reserves (NIR), the primary surplus target, and net domestic assets of the State Bank of Pakistan (SBP) are expected to align with the targets.

According to IMF conditionality, if a country fails to meet a QPC, the IMF Executive Board may grant a waiver if it is satisfied that the program’s objectives remain achievable. Such waivers are typically considered when deviations are minor, temporary, or when national authorities take corrective actions. Based on this, even if the government slightly misses a QPC and takes appropriate corrective measures, the board may approve a waiver.

Available data suggests that the government is in compliance with most QPCs, though data for some criteria has yet to be disclosed. It is estimated that the government will meet the NIR target, with NIR for September 2024 and December 2024 projected at -$9.6 billion and -$8.7 billion, respectively, in line with the targets. Similarly, the net domestic assets of the SBP are below the ceiling target and are likely to remain within limits. Pakistan is also expected to achieve targets related to foreign currency swaps and forwards, the number of new tax filers, and the primary budget deficit.

Data for government guarantees as of June 2024 indicates that the targets for September and December 2024 are also achievable. However, information on spending under targeted cash transfers has not yet been disclosed.

Some indicative targets may be missed, but these deviations are not expected to significantly impact the overall program’s progress.