Pakistan needs another IMF programme and support from other multilateral lenders, according to a report released by the International Monetary Fund (IMF).
The report, which analysed Pakistan's macroeconomic outlook, stated that resolving the country's structural challenges will require continued adjustment and creditor support beyond the current programme period.
The IMF also highlighted the need for steadfast implementation of agreed policies and continued financial support from external partners to address Pakistan's complex economic challenges and maintain macroeconomic stability.
The IMF has approved a USD 3 billion bailout programme for Pakistan to help stabilize its struggling economy.
However, the report suggests that a possible successor arrangement could be beneficial in restoring Pakistan's medium-term viability and capacity to repay.
It emphasised the importance of implementing programme agreements consistently and decisively to reduce risks and address the country's multifaceted risks.
In light of Pakistan's economic challenges and exceptionally high risks, the IMF report stressed the need for ongoing support from external partners.
The report also suggested that a future IMF programme could help anchor the necessary policy adjustments to restore Pakistan's medium-term viability and capacity to repay its debts.
According to the report, Pakistan's government has made an international commitment to promptly inform about a Rs 5 per unit increase in electricity rates and a more than 40 per cent increase in gas rates. This is due to the gas sector's circular debt now competing with losses in the power sector.
The government has pledged to address the factors contributing to circular debt in the power sector.
They will notify the recent tariff increases determined by Nepra (National Electric Power Regulatory Authority) starting from 1 July. They will also ensure timely notification of quarterly and monthly tariff adjustments. If revenue targets are not met, the government is prepared to take additional measures.
They have also promised to renegotiate power-purchase agreements with remaining power producers, including Chinese companies, or extend their debt servicing periods.
In the gas sector, the government has committed to immediately notifying gas tariff adjustments determined by Ogra.
The government has given an assurance to protect the fiscal program outlined in the recent budget and other commitments with the IMF.
To ensure fiscal discipline, the government will not allow supplementary grants for any additional unbudgeted spending beyond the approved level set by the parliament in the current fiscal year.
This will remain in effect until a new government is formed after the elections, except in the case of a severe natural disaster.
Furthermore, the government is dedicated to ensuring monetary and financial stability. They plan to return to a market-determined exchange rate, lower inflation towards the target, and rebuild foreign exchange reserves.
To achieve these goals, the government has implemented various measures and policies. These actions are aimed at promoting economic growth, improving the energy sector, and maintaining stability in the monetary and financial systems.
The authorities have stated that they will not provide guidance or express a preference to market participants regarding the exchange rate or regulate demand for forex through administrative action, whether formal or informal.
However, once proper market functioning is restored, they have committed to maintaining the average premium between the interbank and open market rates within a range of 1.25 per cent to minus 1.25 per cent during any consecutive five business day period.
Additionally, they will publish daily interbank and open market exchange rates, according to Dawn.
According to the report, there is a need to approach the donor for a fresh loan next month.
Bhuvan Krishna is Staff Writer at Swarajya.
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