EUR 9.11 For Business Accounts Only

Pakistan Economy_IMF deal finally in the bag, (AKD Daily, Jul 14, 2022)

IMF deal finally in the bag
Pakistan was finally able to clinch the staff level agreement with IMF after the formal
announcement was made by the fund regarding the completion of 7th and 8th reviews.
The two reviews were clubbed together and the total disbursement of ~US$1.2bn will be
made pending the approval from executive board, which is more of a formality.
 IMF highlighted 5 key policy priorities after the conclusion of staff level agreement which
include i) fiscal discipline, ii) continuation of power sector reforms, iii) pro-active monetary
policy, iv) reforms in social safety programs and v) improved governance.
 Implementation of the agreed targets will likely remain challenging but will install the
much needed fiscal prudence in the operational activities of the GoP and will help curtail
the fiscal deficit which is likely to slip to over 8% of GDP in FY22.
 GoP took additional taxation measures which are expected to raise another PkR436bn, to
this end, the ceiling on petroleum levy was increased to PkR50/ltr and PIT were also revised.
However, there will likely be slippages on expenditure side with debt servicing cost
likely a key culprit amid rising interest rates.
 Country’s FX reserve had yet again fallen below US$10bn mark after the country made
payments on its debt servicing. As a result, the currency has once again come under pressure,
depreciating by ~1% yesterday. However, the news of staff level agreement will
likely give some stability to PkR and we may see rupee reversing some of the losses
against US$.
 The news of a potential agreement had already broken yesterday and was very well received
by the street as the index rallied by up-to 600 points before the close of the day.
Market will likely remain buoyant as the IMF agreement will likely result in further inflows
and will allow country to meet its maturing liabilities.