Daily Times

“IMF Staff reached a Staff-Level Agreement with the Pakistani authorities on a new 37-month EFF arrangement on July 12th of 2024. And we are very happy that we can say now that the Board meeting is scheduled to take place on September 25th. And this is following Pakistan obtaining necessary financing assurances from its development partners. This new EFF arrangement that will be subject to Board approval follows the successful implementation of the 2023 9-month Stand-by Arrangement. Consistent policy-making has supported economic stability in Pakistan, most notably a resumption of growth, a significant disinflation, and a significant increase in the country’s international reserves,” said Julie Kozack, Director of Communications, IMF on Thursday 12th September.

Her Press Brief ended the uncertainties subject to the approval of the Extended Fund Facility (EFF) of 7 billion Dollars which was pending for almost two months. This deal will surely prove to be a significant step towards restoring macroeconomic stability. Moody’s and Fitch both upgraded Pakistan’s credit rating lately in last month, boosting potential foreign investment in the economy. Now, with this IMF deal, Pakistan could achieve a better fiscal position and foster growth in various economic sectors.

The exchange rate has been quite stable for the last few months, which is very essential for mitigating the risks associated with seamless management of imports and exports.

Along with the good news from the IMF Spokesperson, recent developments on the economic front provide a ray of hope for the revival of the economy in Pakistan. State Bank of Pakistan’s Monetary Policy Committee has reduced the interest rate by 200 basis points (bps) from 19.5 percent to 17.5 percent. This reduction comes at a very important time when inflation rates are also declining. Compared with last year inflation has shown a decline of almost 18 percent from 27.4 percent in August 2023 to 9.6 percent in the last month.

Both reduction in the interest rate and inflation will result in the flourishment of businesses and encouragement of investment, paving the way for more employment opportunities and fostering a conducive and favourable environment for economic growth. Another good indicator of Pakistan’s economy is the relatively stable dollar exchange rate. The exchange rate has been quite stable for the last few months, which is very essential for mitigating the risks associated with foreign exchange fluctuations and seamless management of imports and exports.

Lowered fuel prices are another positive sign of economic revival in the country. Fuel prices have started to decrease, offering a major relief to citizens and businesses alike. Lower fuel rates lead to reduced transportation expenses, which, in turn, lower the prices of goods and services across the board. This decrease is particularly important for Pakistan where inflation has continuously impacted the cost of living of the citizens. However, the reduction in fuel prices and decreased inflation is very pivotal for economic uplifting. Remittances are considered to be an important source of foreign exchange. These are considered to have a positive effect on the economic growth of the country. As per the State Bank of Pakistan’s Working Paper titled ‘Do Workers’ Remittances Promote Economic Growth in Pakistan?’, “One per cent increase in the remittances to GDP ratio leads to a 0.15 percent increase in the GDP per capita. This increase in the per capita GDP could be due to the increase in the consumption of the low-income recipients”. This proves that remittances are a vital source for increasing the GDP of the country as well. A sufficient inflow of remittances guarantees the increased spending of citizens which, furthermore guarantees and drives domestic demand. In short, remittances cushion the economy of the country from unexpected shocks and contribute to overall stability.

Last but not least, Pakistanis can expect a reduced electric bill from October onwards primarily in winter as the Government of Pakistan is renegotiating their contracts with Independent Power Producers (IPPs) to cut off the electric tariffs.

Recent economic development signals a favourable outlook. Despite the ongoing political challenges, the Government is trying to maintain economic stability by providing relief in electric bills and fuel prices, which is a very good sign. These signs coupled with the indicators mentioned will surely pave the way for a more resilient and prosperous future for Pakistan. The upcoming IMF board meeting on September 25th will be a crucial moment for the country, and the hope is that it will mark the beginning of a new chapter in Pakistan’s economic revival.

The writer is a graduate of QAU, PhD scholar and a freelance writer and can be reached at fa7263125@gmail.com