May 10, 2024 – MediaLine Pakistan

May 10, 2024

KFSH&RC Pushes Boundaries with a Year of Achievements Across Three Centres of Excellence

RIYADH, Saudi Arabia, May 10, 2024 (GLOBE NEWSWIRE) — King Faisal Specialist Hospital & Research Centre (KFSH&RC) has experienced a year of achievements across its three Centres of Excellence—Oncology, Genomics, and Transplantation.

KFSH&RC’s Oncology Centre of Excellence continues to lead the fight against the disease in the Kingdom. This year alone, the centre has treated 25% of all cancer cases in Saudi Arabia, achieving a 50% overall recovery rate and up to 90% recovery in leukemia cases. With almost five decades of service, the centre’s commitment to providing advanced cancer treatments is evident in its adoption of technologies such as CAR T-cell therapy and liquid biopsy, which provide less invasive alternatives to traditional methods, along with extensive bone marrow transplants, and revolutionary techniques like Hyperthermic Intraperitoneal Chemotherapy (HIPEC).

KFSH&RC Pushes Boundaries with a Year of Achievements Across Three Centres of Excellence

Notably, KFSH&RC has achieved a milestone by completing over 100 CAR T-cell therapy procedures, a novel treatment that genetically modifies a patient’s immune cells to fight cancer. This achievement puts it on par with renowned institutions that are also advancing CAR-T cell therapy for various blood cancers and exploring expanded applications through clinical trials and new treatment protocols. Furthermore, the centre’s focus on pediatric oncology boasts a 97% five-year survival rate for renal tumors and a 92% survival rate for acute lymphoblastic leukemia in children.

With rapid advancements in genomic medicine, KFSH&RC is adopting next-generation sequencing technologies into patient care in its Genomic Centre, revolutionizing local and regional approaches to disease management. KFSH&RC’s discovery of the bacterial strain Stenotrophomonas Riyadhensis, facilitated by whole-genome sequencing (WGS) technology, has contributed to our understanding of bacterial antibiotic resistance mechanisms. With 15,698 patient visits and over 5,658 whole genomes completed in 2023, the centre ensures that prevention, diagnosis, and treatment are precise and personalized.

KFSH&RC’s Organ Transplant Centre of Excellence (OTCoE) continues to be the primary contributor to organ transplantation activities in the Kingdom, accounting for 65% of all transplants performed nationally. In 2023, OTCoE performed 1,092 solid organ transplants, including the world’s first fully robotic liver transplant— where doctors employed robotic technology to conduct surgery on both patient and donor — an achievement that places the centre at the forefront of global transplantation practices.

As KFSH&RC continues to push the boundaries of what is possible in medical science, its efforts not only inspire but also significantly impact the global healthcare community, reaffirming its role as a leader in medical innovation and specialized healthcare.

About King Faisal Specialist Hospital & Research Centre (KFSH&RC):

King Faisal Specialist Hospital & Research Centre (KFSH&RC) stands as a leading healthcare institution in the Middle East, envisioned to be the optimal choice for every patient seeking specialized healthcare. The hospital boasts a rich history in the treatment of cancers, cardiovascular diseases, organ transplantation, neurosciences, and genetics.

In 2024, “Brand Finance” ranked King Faisal Specialist Hospital & Research Centre as the top academic medical centre in the Middle East and Africa, and among the top 20 globally for the second consecutive year. Additionally, in 2024, it was recognized as one of the leading global healthcare providers by Newsweek magazine.

As part of Saudi Vision 2030, a royal decree was issued on December 21, 2021, to transform the hospital into an independent, non-profit, government-owned entity, paving the way for a comprehensive transformation program aimed at achieving global leadership in healthcare through excellence and innovation.

CONTACT INFORMATION

For more information, please contact:

Mr. Essam Al-Zahrani, Acting Media Affairs Head, 0555254429

Mr. Abdullah Al-Aown, Media Coordination Officer, 0556294232

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/e99afd2f-d5c6-400e-9290-26b36a580bee

GlobeNewswire Distribution ID 9115490

May 10, 2024

Invitation to attend the annual and the extraordinary shareholders’ meetings of the Company to be held on June 12, 2024

REGULATED INFORMATION
May 10, 2024, 7:00am CET / 1:00am ET

NYXOAH SA
(Euronext Brussels: NYXH)
Rue Edouard Belin 12, 1435 Mont-Saint-Guibert, Belgium
(hereinafter the “Company”)

Invitation to attend the annual and the extraordinary shareholders’ meetings of the Company
to be held on June 12, 2024

The board of directors of the Company is pleased to invite its securities holders to attend the annual shareholders’ meeting of the Company, to be held on Wednesday, June 12, 2024 at 2:00 p.m. CET at the Company’s seat, or at such other place as will be indicated prior to such time. The annual shareholders’ meeting will be followed immediately by an extraordinary shareholders’ meeting.

The Company will also set up a video conference to allow holders of securities of the Company who have duly registered for the annual and the extraordinary shareholders’ meetings to follow the meetings remotely and ask questions, as the case may be in writing, during the meetings. The modalities to attend the meetings via video conference will be communicated to the relevant securities holders in due time. The videoconference will not qualify as an electronic communication tool to attend and vote at the shareholders’ meetings as referred to in Article 7:137 of the Belgian Code of Companies and Associations, but will be an extra facility for securities holders to follow the shareholders’ meetings. Holders of securities wishing to attend the meetings via video conference and also validly vote on the items on the agendas, are invited to exercise their voting rights prior to the shareholders’ meetings by following the rules set out in this convening notice, either by voting remotely by mail, or by giving a proxy to a representative of the Company.

In order to facilitate the keeping of the attendance list on the day of the annual and the extraordinary shareholders’ meetings, the holders of securities issued by the Company and their representatives are invited to register as from 1:30 p.m. CET.

AGENDA OF THE ANNUAL SHAREHOLDERS’ MEETING

Acknowledgement and discussion of:

the statutory annual accounts for the financial year ended on December 31, 2023;
the consolidated financial statements for the financial year ended on December 31, 2023;
the annual report of the board of directors on the statutory annual accounts for the financial year ended on December 31, 2023;
the annual report of the board of directors on the consolidated financial statements for the financial year ended on December 31, 2023;
the statutory auditor’s report on the statutory annual accounts for the financial year ended on December 31, 2023; and
the statutory auditor’s report on the consolidated financial statements for the financial year ended on December 31, 2023.

1. Approval of the statutory annual accounts for the financial year ended on December 31, 2023 and the proposed allocation of the result

Proposed decision: The shareholders’ meeting decides to approve the annual accounts for the financial year ended on December 31, 2023 and the allocation of the result as proposed by the board of directors.

2. Discharge of directors

Proposed decision: The shareholders’ meeting decides to grant discharge to each of the directors who was in office during the financial year ended on December 31, 2023 for the performance of their mandate during that financial year.

3. Discharge of the statutory auditor

Proposed decision: The shareholders’ meeting decides to grant discharge to the statutory auditor who was in office during the financial year ended on December 31, 2023 for the performance of his mandate during that financial year.

4. Acknowledgement and approval of the remuneration report

Proposed decision: The shareholders’ meeting decides to approve the remuneration report.

Acknowledgement and approval of the amended remuneration policy to allow for a share-based remuneration for the non-executive directors

Upon the recommendation of the remuneration committee, the board of directors proposes to amend the remuneration policy of the Company to allow for the granting of so-called “restricted share units” or “RSUs” to non-executive directors. This RSU remuneration component replaces the existing share-based remuneration in the form of a grant of warrants to non-executive directors as approved by the annual shareholders’ meeting of June 8, 2022. The proposed features of the RSUs are summarized in the proposed amended remuneration policy.

Proposed decision: The shareholders’ meeting decides to approve (a) the amended remuneration policy, (b) the granting to non-executive directors of “restricted share units” or “RSUs” as further described in the amended remuneration policy, whereby the RSUs shall be awarded for the first time as of the date of this shareholders’ meeting, and (c) the cancellation as of the date of this shareholders’ meeting of the current warrant component of the non-executive directors’ remuneration as approved by the annual shareholders’ meeting of June 8, 2022.

Appointment of Robelga SRL (permanently represented by Robert Taub) as director

Proposed decision: The shareholders’ meeting decides to appoint Robelga SRL, permanently represented by Robert Taub, as director of the Company until the annual shareholders’ meeting to be held in 2025. The mandate of Robelga SRL will be remunerated as provided for the non-executive members of the board of directors in the Company’s remuneration policy as adopted by the shareholders’ meeting and, as concerns the cash remuneration, as decided by the annual shareholders’ meeting of June 8, 2022.

1. Reappointment of Jürgen Hambrecht as independent director

Proposed decision: The shareholders’ meeting decides to reappoint Jürgen Hambrecht as an independent director of the Company within the meaning of Article 7:87 of the CCA and provision 3.5 of the 2020 Belgian Corporate Governance Code, until the annual shareholders’ meeting to be held in 2025. The mandate of Jürgen Hambrecht will be remunerated as provided for the non-executive members of the board of directors in the Company’s remuneration policy as adopted by the shareholders’ meeting and, as concerns the cash remuneration, as decided by the annual shareholders’ meeting of June 8, 2022.

2. Reappointment of Kevin Rakin as independent director

Proposed decision: The shareholders’ meeting decides to reappoint Kevin Rakin as an independent director of the Company within the meaning of Article 7:87 of the CCA and provision 3.5 of the 2020 Belgian Corporate Governance Code, until the annual shareholders’ meeting to be held in 2025. The mandate of Kevin Rakin will be remunerated as provided for the non-executive members of the board of directors in the Company’s remuneration policy as adopted by the shareholders’ meeting and, as concerns the cash remuneration, as decided by the annual shareholders’ meeting of June 8, 2022.

3. Reappointment of Rita Johnson-Mills as independent director

Proposed decision: The shareholders’ meeting decides to reappoint Rita Johnson-Mills as an independent director of the Company within the meaning of Article 7:87 of the CCA and provision 3.5 of the 2020 Belgian Corporate Governance Code, until the annual shareholders’ meeting to be held in 2025. The mandate of Rita Johnson-Mills will be remunerated as provided for the non-executive members of the board of directors in the Company’s remuneration policy as adopted by the shareholders’ meeting and, as concerns the cash remuneration, as decided by the annual shareholders’ meeting of June 8, 2022.

4. Reappointment of Virginia Kirby as independent director

Proposed decision: The shareholders’ meeting decides to reappoint Virginia Kirby as an independent director of the Company within the meaning of Article 7:87 of the CCA and provision 3.5 of the 2020 Belgian Corporate Governance Code, until the annual shareholders’ meeting to be held in 2025. The mandate of Virginia Kirby will be remunerated as provided for the non-executive members of the board of directors in the Company’s remuneration policy as adopted by the shareholders’ meeting and, as concerns the cash remuneration, as decided by the annual shareholders’ meeting of June 8, 2022.

5. Reappointment of Wildman Ventures LLC (permanently represented by Daniel Wildman) as independent director

Proposed decision: The shareholders’ meeting decides to reappoint Wildman Ventures LLC, permanently represented by Daniel Wildman, as an independent director of the Company within the meaning of Article 7:87 of the CCA and provision 3.5 of the 2020 Belgian Corporate Governance Code, until the annual shareholders’ meeting to be held in 2025. The mandate of Wildman Ventures LLC will be remunerated as provided for the non-executive members of the board of directors in the Company’s remuneration policy as adopted by the shareholders’ meeting and, as concerns the cash remuneration, as decided by the annual shareholders’ meeting of June 8, 2022.

6. Reappointment of Pierre Gianello as director

Proposed decision: The shareholders’ meeting decides to reappoint Pierre Gianello as director of the Company until the annual shareholders’ meeting to be held in 2025. The mandate of Pierre Gianello will be remunerated as provided for the non-executive members of the board of directors in the Company’s remuneration policy as adopted by the shareholders’ meeting and, as concerns the cash remuneration, as decided by the annual shareholders’ meeting of June 8, 2022.

7. Reappointment of Olivier Taelman as director

Proposed decision: The shareholders’ meeting decides to reappoint Olivier Taelman as director of the Company until the annual shareholders’ meeting to be held in 2025. The mandate of Olivier Taelman will not be remunerated.

AGENDA OF THE EXTRAORDINARY SHAREHOLDERS’ MEETING

Acknowledgment and discussion of the special report by the board of directors drawn up in accordance with article 7:199 of the Belgian Code of Companies and Associations relating to the proposal to renew the authorized capital

8. Renewal of the authorization to the board of directors to increase the share capital within the framework of the authorized capital

Proposed decision: The shareholders’ meeting resolves to renew the authorization to the board of directors to increase the share capital in one or several times, during a period of five (5) years as from the publication in the Annexes to the Belgian Official Gazette of this authorization, with an aggregate amount equal to EUR 3,436,000, and this in accordance with the terms and conditions set forth in the special report of the board of directors prepared in accordance with Article 7:199 of the Belgian Code of Companies and Associations, as referred to in agenda item 1 of this extraordinary shareholders’ meeting.

Consequently, the shareholders’ meeting resolves to delete the first and second paragraph of Article 7 (“Authorized capital”) of the articles of association of the Company entirely and to replace such first and second paragraph of Article 7 respectively with the following text (whereby (i) the date referred to between brackets in the second paragraph shall be the date of the shareholders’ meeting approving the renewed authorized capital, and (ii) the other provisions of Article 7 remain in place and are re-approved):

A) text of the first paragraph: “The board of directors is authorized to increase the capital of the company on one or several occasions in accordance with the Code of Companies and Associations by a maximum aggregate amount of EUR 3,436,000.”

B) text of the second paragraph: “This authorization is valid for a period of five years as from the date of publication in the Annexes to the Belgian State Gazette of an extract of the minutes of the extraordinary shareholders’ meeting of the company of [date of the shareholders’ meeting approving the renewed authorized capital].”

5. Power of attorney to the notary

Proposed decision: The shareholders’ meeting decides to grant the acting notary, and any other notary of “Berquin Notarissen”, all powers to draw up and sign a restated version of the articles of association of the Company and to file them in the appropriate data base in accordance with applicable law.

ADMISSION FORMALITIES AND PARTICIPATION IN THE SHAREHOLDERS’ MEETINGS

In order to attend the shareholders’ meetings on June 12, 2024, the holders of shares and subscription rights are requested to comply with articles 26 and 27 of the Company’s articles of association and the following formalities.

If the attendance quorum required pursuant to Article 7:153 of the Belgian Code of Companies and Associations is not met at the extraordinary shareholders’ meeting of June 12, 2024, a second extraordinary shareholders’ meeting will be convened on Monday, July 1, 2024 at 2:00 p.m. CET, to deliberate and resolve on the agenda items of the extraordinary shareholders’ meeting regardless of the share capital present or represented by the shareholders.

The holders of subscription rights issued by the Company can, in accordance with Article 7:135 of the Belgian Code of Companies and Associations only attend the shareholders’ meetings with a consultative vote.

In order to be able to participate in the annual and the extraordinary shareholders’ meetings, a holder of securities issued by the Company must satisfy two conditions: (a) be registered as holder of such securities on the registration date and (b) notify the Company, as described below.

Registration date

The registration date is May 29, 2024 at midnight (Belgian time). Only persons registered as securities holders on that date and time will be entitled to attend and (if they are shareholders) vote at the meetings. The number of securities held by the securities holder on the day of the meetings will not be taken into account.

Holders of registered shares or subscription rights must be registered in the Company’s share register or subscription rights register, as the case may be, by midnight (Belgian time) on May 29, 2024.
Holders of dematerialized shares must deliver, or have delivered, to the Company, at the latest on June 6, 2024 at midnight (Belgian time), a certificate issued by the authorized account holder or by the settlement institution certifying the number of dematerialized shares registered in the name of the shareholder in its accounts on the registration date, for which the shareholder has declared his intention to participate in the meetings. This certificate must be sent to the Company by e-mail to shareholders@nyxoah.com.

Intention to participate in the meetings

The securities holders must inform the board of directors of the Company by e-mail to shareholders@nyxoah.com no later than June 6, 2024, of their intention to participate in the meetings, indicate the number of securities for which they intend to vote, and, for holders of dematerialized shares, present proof of their registration as a shareholder on the registration date.

In order to attend the meetings, securities holders and proxy holders must prove their identity and representatives of legal entities must submit documents establishing their identity and their power of representation, at the latest immediately before the start of the meetings.

Voting by proxy or by mail

Shareholders can exercise their voting rights prior to the meetings either (i) by voting by mail or (ii) by giving a proxy to a representative of the Company.

If shareholders vote by proxy, the proxy holder will be a representative of the Company. This proxy holder may only exercise the voting right in accordance with the voting instructions contained in the proxy.

The proxy voting form and the form for voting by mail approved by the Company must be used for this purpose. These forms can be downloaded from the Company’s website (https://investors.nyxoah.com/shareholder-information > Shareholders’ Meetings).

If shareholders vote by proxy or by mail, they must, in addition to the above formalities, send by e-mail to shareholders@nyxoah.com a duly completed and signed proxy voting form or form for voting by mail. These documents must reach the Company no later than June 6, 2024.

Note that the proxy voting forms and the forms for voting by mail may be signed by using an electronic signature as provided for in Article 7:143 § 2 of the Belgian Code of Companies and Associations.

Participation in the virtual shareholders’ meetings

Securities holders wishing to participate remotely, virtually and in real time, to the Company’s annual and extraordinary shareholders’ meetings are required to confirm their participation and communicate their e-mail address to the Company by June 6, 2024 at the latest by e-mail to shareholders@nyxoah.com.

A few days before the shareholders’ meetings, securities holders who have completed this formality will receive by e-mail (at the address they will have communicated to the Company) a link, and as the case may be a user name and a password, enabling them to follow and participate in the shareholders’ meetings via their computer, tablet or smartphone.

Just before the start of the shareholders’ meetings, the securities holders will have to click on the link that will have been previously communicated to them by e-mail, and as the case may be enter their user name and password, in order to join the virtual shareholders’ meetings.

Securities holders attending the virtual shareholders’ meetings will have the opportunity to view the live broadcast of the meetings in real time and to ask questions to the directors, as the case may be in writing, during the meetings regarding the items on the agenda.

New agenda items, proposed decisions and right to ask questions

Shareholders holding at least 3% of the capital who wish to request the inclusion of new items on the agenda or to submit proposals for decision must, in addition to the above formalities, establish on the date of their request proof of ownership of the required participation in the capital and send the text of the agenda items and the proposed decisions by e-mail to shareholders@nyxoah.com no later than May 21, 2024. The request must also mention the e-mail address to which the Company will send the confirmation of receipt of the request.

The case being, the revised agenda will be published no later than May 28, 2024.

Shareholders who wish to do so may send any questions they may have to the Company, relating solely to the agendas of the annual and the extraordinary shareholders’ meetings, by e-mail to shareholders@nyxoah.com, no later than June 6, 2024. The answers to these questions will be provided during the annual and the extraordinary shareholders’ meetings in accordance with applicable law.

Documentation

All documents concerning the annual and the extraordinary shareholders’ meetings that are required by law to be made available, as well as the total number of shares and voting rights outstanding, are available on the Company’s website on: https://investors.nyxoah.com/shareholder-information. The documents are also available at the seat of the Company and can only be consulted by appointment made by e-mail (shareholders@nyxoah.com). Shareholders may also obtain a hard copy of these documents free of charge by sending an e-mail to shareholders@nyxoah.com.

The aforementioned formalities, as well as the instructions on the Company’s website and on the proxy voting forms and forms for voting by mail must be strictly observed.

Various

Quorum: There is no particular quorum requirement for the deliberation and voting of the decisions proposed in the agenda of the annual shareholders’ meeting.

In accordance with Article 7:153 of the Belgian Code of Companies and Associations, at least 50% of the share capital must be present or represented for the deliberation and voting on the decisions proposed in item 2 of the agenda of the extraordinary shareholders’ meeting.

Voting: Each share entitles the holder to one vote.

Majority: In accordance with applicable law, the decisions proposed in the agenda of the annual shareholders’ meeting and the decisions proposed in the agenda of the extraordinary shareholders’ meeting, other than agenda item 2, will be adopted if they are approved by a simple majority of the votes validly cast by the shareholders present or represented at the relevant shareholders’ meeting. In accordance with Article 7:153 of the Belgian Code of Companies and Associations, the decisions proposed in item 2 of the agenda of the extraordinary shareholders’ meeting will be adopted if they are approved by 75% of the votes validly cast by the shareholders present or represented. Blank votes and abstentions are not taken into account.

Personal data: The Company is responsible for the processing of personal data that it receives or collects from holders of securities issued by the Company and agents in connection with the Company’s shareholders’ meetings.

The processing of such data will be carried out for the purpose of organizing and holding the relevant shareholders’ meeting, including convening, registration, attendance and voting, as well as maintaining lists or registers of securities holders and for purposes of analysis of the Company’s securities holders’ base.

The data includes, but is not limited to, the following: identification data, the number and nature of a holder’s securities issued by the Company, proxies and voting instructions. This information may also be transferred to third parties for the purpose of assisting or servicing the Company in connection with the foregoing.

The processing of such data will be carried out, mutatis mutandis, in accordance with the Company’s privacy notice available on the Company’s website: https://www.nyxoah.com/privacy-notice-nyxoah.

The Company draws the attention of holders of securities issued by the Company and agents to the description of the rights they may have as data subjects, such as, inter alia, the right of inspection, the right to rectify and the right to object to processing, which are set out in the section entitled “What rights can you exercise?” of the aforementioned privacy notice.

All this is without prejudice to the applicable rules on registration, use of information and participation in shareholders’ meetings in order to exercise your rights as a data subject. For any other information relating to the processing of personal data by or on behalf of the Company, the Company can be contacted by e-mail at privacy@nyxoah.com.

The board of directors

Attachment

Nyxoah – ASM ESM 2024 convening notice – PR (ENG)

GlobeNewswire Distribution ID 1000949955

May 10, 2024

SECOND AND FINAL REVIEW UNDER THE STAND-BY ARRANGEMENT-PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR PAKISTAN

Washington D.C, Following is the full text of International Monetary Fund Country Report In the context of the Second Review Under the Stand-by Arrangement, the following documents have been released and are included in this package:

A Press Release including a statement by the Chair of the Executive Board.

The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on April 29, 2024 following discussions that ended on March 19, 2024, with the officials of Pakistan on economic developments and policies underpinning the IMF arrangement under the Stand-By Arrangement. Based on information available at the time of these discussions, the staff report was completed on April 8, 2024.

A Statement by the Executive Director for Pakistan.

IMF Executive Board Completes Second and Final Review of the Stand-By Arrangement for Pakistan

The IMF Executive Board completed the second review under the Stand-By Arrangement (SBA) for Pakistan, allowing for an immediate disbursement of SDR 828 million (around $1.1 billion), bringing total disbursements under the arrangement to SDR 2.250 billion (about $3 billion). The completion of the second and final review reflects the authorities’ stronger policy efforts under the SBA, which have supported the stabilization of the economy and the return of modest growth

To move Pakistan from stabilization to a strong and sustainable recovery the authorities need to continue their policy and reform efforts, including strict adherence to fiscal targets while protecting the vulnerable; a market-determined exchange rate to absorb external shocks; and broadening of structural reforms to support stronger and more inclusive growth.

April 29, 2024: Today, the Executive Board of the International Monetary Fund (IMF) completed the second and final review of Pakistan’s economic reform program supported by the IMF’s Stand-By Arrangement (SBA). The Board’s decision allows for an immediate disbursement of SDR 828 million (around $1.1 billion), bringing total disbursements under the arrangement to SDR 2.250 billion (about $3 billion).

Pakistan’s 9-month SBA, approved by the Executive Board on July 12, 2023, successfully provided a policy anchor to address domestic and external imbalances as well as a framework for financial support from multilateral and bilateral partners. The program focused on (i) necessary fiscal adjustment and maintenance of debt sustainability via FY24 budget implementation; (ii) protection of critical social spending; (iii) buffering external shocks and eliminating FX shortages by returning to proper FX market functioning; (iv) making progress on disinflation by maintaining a tight monetary policy; and (v) furthering progress on structural reforms, focused on energy sector viability, SOE governance, and climate resilience.

Macroeconomic conditions have improved over the course of the program. Growth of 2 percent is expected in FY24 given continued recovery in the second half of the fiscal year. The fiscal position continues to strengthen with a primary surplus of 1.8 percent of GDP achieved in the first

half of fiscal year 2024, well ahead of projections and putting Pakistan on track to achieve its end- FY24 target primary surplus of 0.4 percent of GDP. Inflation, while still elevated, continues to decline, and, with appropriately tight, data-driven monetary policy maintained, is expected to

reach around 20 percent by end-June. Assuming ongoing sound policies and reform efforts, inflation should return to the SBP’s target with growth continuing to strengthen over the medium term. Gross reserves have increased to around $8 billion, up from $4.5 billion at the start of the program, and are projected to continue being rebuilt over the medium term.

Following the Executive Board discussion, Antoinette Sayeh, Deputy Managing Director and Chair, made the following statement:

“Pakistan’s determined policy efforts under the 2023 Stand-By Arrangement (SBA) have brought progress in restoring economic stability. Moderate growth has returned; external pressures have eased; and while still elevated, inflation has begun to decline. Given the significant challenges ahead, Pakistan should capitalize on this hard-won stability, persevering—beyond the current arrangement—with sound macroeconomic policies and structural reforms to create stronger, inclusive, and sustainable growth. Continued external support will also be critical.

“The authorities’ revenue performance, as well as federal spending restraint, helped achieve a sizeable primary surplus in the first half of FY2024, in line with program targets. Continued revenue mobilization efforts and spending discipline at both federal and provincial levels remain critical to ensure that the primary surplus target is achieved. Beyond FY2024, continued fiscal sustainability and additional space for social and development spending depend on further mobilizing revenues, especially from non-filers and undertaxed sectors, and on improving public financial management.

“The authorities have stabilized the energy sector’s circular debt over the course of the SBA through timely tariff adjustments and enhanced collection efforts. While these actions need to continue, it is also critical that the authorities undertake cost-side reforms to address the sector’s underlying issues and viability.

“The State Bank of Pakistan’s tight monetary policy stance remains appropriate until inflation returns to more moderate levels. Further improvements in the functioning of the foreign exchange (FX) market, together with a market-determined exchange rate, will help buffer external shocks and attract financing, thereby supporting competitiveness and growth. The significant rebuilding

of FX reserves under the SBA needs to continue. Moreover, stronger action to address undercapitalized financial institutions and, more broadly, vigilance over the financial sector are needed to ensure financial stability.

“Achieving strong, long-term inclusive growth and creating jobs require accelerating structural reforms and continued protection of the most vulnerable through an adequately-financed Benazir Income Support Program. Priorities include advancing the reform of state-owned enterprises (SOEs), including to ensure that all SOEs fall under the new policy framework; strengthening governance and anti-corruption institutions; and continuing to build climate resilience.

Table 1. Pakistan: Selected Economic Indicators, FY2023FY2025 1/

Population: 231.6 million (2022/23) Per capita GDP: US$1,446.3 (FY2023)

Quota: SDR 2,031 million Poverty rate: 21.9 percent

Main exports: Textiles (US$16.5 billion, 2022/23) (national line; FY2019)

Key export markets: European Union, United States, UAE

FY2023 FY2024 FY2025

Proj. Proj.

Output and prices (% change)

Real GDP at factor cost -0.2 2.0 3.5

Employment (%)

Unemployment rate 8.5 8.0 7.5

Prices (%)

Consumer prices, period average 29.2 24.8 12.7

Consumer prices, end of period 29.4 19.6 9.5

General government finances (% GDP)

Revenue and grants 11.4 12.5 12.4

Expenditure 19.2 20.0 19.8

Budget balance, including grants -7.8 -7.4 -7.4

Budget balance, excluding grants -7.8 -7.5 -7.4

Primary balance, excluding grants -1.0 0.4 0.4

Underlying primary balance (excluding grants) 2/ -0.8 0.4 0.4

Total general government debt excl. IMF obligations 74.7 69.6 68.1

External general government debt 28.5 26.2 25.0

Domestic general government debt 46.2 43.3 43.2

General government debt incl. IMF obligations 77.1 72.1 70.0

General government and government guaranteed debt incl. 81.3 76.0 73.6

Monetary and credit (% change, unless otherwise indicated)

Broad money 14.2 13.5 22.0

Private credit 2.3 3.5 20.0

Six-month treasury bill rate (%) 3/ 18.3 … …

Balance of Payments (% GDP, unless otherwise indicated)

Current account balance -0.7 -0.8 -1.2

Foreign direct investment 0.5 0.2 0.3

Gross reserves (millions of U.S. dollars) 4/ 4,455 9,029 13,364

Months of next year’s imports of goods and services 0.8 1.5 2.1

Total external debt 40.1 36.6 34.7

Exchange rate (% change)

Real effective exchange rate -8.0 … …

Sources: Pakistani authorities; World Bank; and IMF staff estimates and projections.

1/ Fiscal year ends June 30.

2/ Excludes one-off transactions, including asset sales.

3/ Period average.

4/ Excluding gold and foreign currency deposits of commercial banks held with the State Bank of Pakistan.

SECOND AND FINAL REVIEW UNDER THE STAND-BY ARRANGEMENT

EXECUTIVE SUMMARY

Recent developments. The signs of economic stabilization are strengthening, with gradual disinflation underway and external pressures easing further since the first review on the back of improved fiscal balances. However, the outlook remains challenging, with downside risks remaining exceptionally high.

Program performance. The 9-month Stand-by Arrangement (SBA), approved on July 12, 2023, is on track with key program objectives largely achieved (see Annex I). All seven QPCs and all four ITs for end-December were met. All structural benchmarks since the completion of the first review were also met. Support from multilateral and bilateral creditors remains strong and the program is financed.

Policies. The new coalition government that took office on March 11 expressed its commitment to continue to implement policies in line with the SBA to address Pakistan’s structural weaknesses and cement the stability established over the past 9 months. In this regard, strict adherence to the FY24 fiscal target and further adjustment beyond FY24, while protecting development needs and the social safety net, are essential to alleviate external and domestic pressures and ensure fiscal

sustainability. A flexible exchange rate is necessary to buffer shocks and rebuild reserves, and monetary policy should remain tight to bring inflation to more moderate levels and agile to respond proactively if signs of inflation reemerge. Continued regular energy tariff adjustments, keeping pace with costs, are necessary to end the creation of CD, but broader reforms are needed to fundamentally restore energy sector viability. Further progress is also needed on the state-owned enterprise and broader governance reform agendas, which are critical to spur private sector investment, activity, and jobs.

SBA review. Staff supports completion of the review, which would make available SDR 828 million, bringing total access to SDR 2,250 million, and help anchor essential financing from official partners.

Approved By Thanos Arvanitis and Kenneth Kang

Policy discussions were held in Islamabad during March 14-19, 2024. The staff team comprised Nathan Porter (head); Tom Best, Jan Moller, Jason Weiss (all MCD); Julieth Pico Mejía (FAD); Gonzalo Huertas (SPR); Jan Nolte (MCM); Jonathan Pampolina (LEG); Esther Perez Ruiz (Resident Representative); Zafar Hayat and Saihan Mohammad (all Islamabad office). Laura Torrent (MCD) provided research assistance and Nataliya Bondar (MCD) document management assistance.

RECENT DEVELOPMENTS

1. Following the February 8 elections, a new cabinet was sworn in on March 11. The two leading parties of the previous government (April 2022-August 2023), the PML-N and PPP, together with some small parties formed a new coalition, and Shehbaz Sharif (PML-N) was elected as prime minister. Independents associated with former prime minister Imran Khan’s PTI party won more votes than any other group and have formed a sizable opposition in the National Assembly.

2. Macroeconomic conditions continue to improve:

Economic activity. The gradual economic recovery has continued over recent months. Real GDP grew by 1.0 percent yoy in Q2, with agricultural output continuing to rebound strongly (+5.1 percent), offsetting weaker industrial (-0.8 percent) and services (0.0 percent) activity. Q1 GDP growth has also been revised up, to +2.5 percent yoy. The large-scale manufacturing index grew by 1.8 percent yoy in January 2024, and preliminary yield estimates for the Rabi crop suggest a further strengthening of the agricultural recovery. Survey measures of business and consumer confidence have rebounded from September’s lows, and the stock market rallied from October- December, and again following the election, attracting foreign portfolio inflows.

Inflation and monetary policy. Although still high, headline inflation fell to 20.7 percent yoy in March, helped by favorable base effects, lower food inflation (16.8 percent), and gradually easing core inflation (15.4 percent). Noting the still high level of inflation, and considerable risks to its outlook, including from elevated inflation expectations, the Monetary Policy Committee (MPC) kept the policy rate unchanged at 22 percent at its meeting on March 18.

Foreign exchange market. The SBP has completed the transition of the interbank spot market to electronic trading, with a new centralized trading system (featuring anonymized bids) coexisting alongside the pre-existing bilateral trading venue. The FX market has been functioning more normally following SBP efforts to improve pricing transparency in the open market and strengthen the governance requirements for exchange companies. In particular, thepremium between interbank and open market rates has remained negligible, and there is no evidence of pressures in the parallel market.1 The authorities have eliminated, effective January 31, the remaining multiple currency practice (MCP) related to exchange rates applied to transactions between the SBP and the government,2 and effective January 30, the remaining exchange restriction resulting from the limitation on advance payments for imports.

External conditions. The current account deficit narrowed to around US$1 billion over July- February FY24 (against US$3.8 billion over the same period in FY23), driven by higher exports and lower imports and some recovery in remittances. The authorities implemented a first National Tariff Policy (2019-24) which has reduced the complexity of the tariff schedule and introduced duty-free access for imported inputs. Gross reserves remain around US$8 billion, as the SBP’s FX purchases helped offset ongoing debt service payments and the decline in the SBP’s swap/forward book. Market sentiment has improved further, with EMBIG spreads currently around 750 bps, down from 1,400 bps in early January. The external sector assessment finds that Pakistan’s FY23 external position was broadly in line with the level implied by medium-term fundamentals and desirable policies (Annex II). However, as the inflation differential between Pakistan and its peers is still high and the exchange rate has remained broadly stable at around.

1. In relation to commitments for the first review of the SBA (MEFP ¶12.a), the SBP has published a report on pricing and broader developments in informal FX markets.

2. This MCP arose from the potential deviation of more than 2 percent between the previous day’s weighted average customer exchange rates used for the FX transactions between the SBP and the government and the spot exchange rates prevailing on the FX market at the time. Under the new instructions, for transactions with the government, the SBP will apply the weighted average exchange rate of actual interbank transactions of the previous day. The revised methodology meets criteria established by the new MCP policy (18 of the guidance note) for the calculation of one- day lagged official exchange rates which do not give rise to an MCP.

3. This exchange restriction resulted from the limitation on advance payments for imports against letters of credit (LCs) and advance payments beyond the certain amount per invoice (without LCs) for the import of eligible items. See EPD Circular Letter No. 01 of 2024 for details on the removal. To prevent the misuse of advance payments for imports, the SBP has complemented the removal of the exchange restriction with a penalty mechanism applicable if the goods against advance payment are not imported and/or the funds remitted in advance are not repatriated within the prescribed period. This provides incentives for banks to repatriate funds from clients who do not follow- through with imports of goods.

PRs 280 per US$ in recent months, the real effective exchange rate has appreciated somewhat since the beginning of the year.

Banking sector. Banks’ sovereign exposure has continued to increase from 48 percent of assets at end-FY21 to 57.4 percent at end-January 2024, crowding out credit to the private sector. As of end-December 2023, banks’ capital adequacy ratio (CAR), at 19.7 percent, remains well above

the regulatory minimum of 11.5 percent (including the capital conservation buffer). NPLs remained at 7.6 percent, with provisioning at 92.7 percent. Out of 32 banks, three small banks (two private and one public, holding less than 1.5 percent of total banking sector assets) continue to report CAR below the regulatory minimum while the microfinance bank sector faces persistent vulnerabilities.

Fiscal developments. Fiscal balances improved on the back of strong budget execution and revenue performance. The general government achieved a primary surplus of 1.8 percent of GDP in FY24H1, exceeding projections by 0.4 percent of GDP, driven by strong PDL, excise, and direct tax revenues, which offset lower-than-expected import-related revenues and SBP profits. Federal current spending matched program forecasts, but federal PSDP was significantly under- executed. Provincial overspending was only PRs 136 billion in FY24H1, as Punjab’s total expenditures in FY24Q2 were curtailed to partially offset an earlier overrun.4 Other provinces’ PSDP is anticipated to remain close to SBA projections given the government’s constraints and the time required for the new government to develop new schemes.

Pakistan: Fiscal Developments

Revenue Growth in FY24H1 (percent)

Nominal Real

Revenue 45.9 13.3

Federal 48.2 15.1

FBR 30.4 1.2

Domestic tax 41.2 9.7

Direct tax 42.7 10.8

Sales tax 31.3 1.9

FED 56.8 21.7

Import tax 15.5 -10.3

Direct tax 26.2 -2.0

Sales tax 12.2 -12.9

FED 178.0 115.9

Custom 15.9 -10.0

Other federal 116.5 68.1

Provincial 18.9 -7.7

Budget Execution in FY24H1 (PRs billions)

% annual budget

SBA 1st SBA 1st

Realization Realization

review review

Revenue 6,781 6,854 51 51

FBR revenue 4,432 4,469 47 47

Federal non-FBR revenue 1,916 1,941 69 67

Provincial tax revenue 357 365 41 42

Provincial NTR 76 79 37 38

Primary expenditure 5,362 5,006 41 39

Federal Current Expenditure 2,464 2,309 41 38

Provincial Current Expenditure 2,203 2,035 48 44

PSDP and Net Lending 695 661 30 28

Federal PSDP and Net Lending 263 118 29 13

Provincial PSDP 431 543 30 38

Cumulative Primary Surplus 1/ 1,420 1,884

As % of GDP 1.3 1.8

In FY24H1, Punjab settled its decade-long accumulated commodity debt (created by provincial food departments outside its fiscal perimeter). It made non-budgeted payments to the principal of PRs 190 billion, with the last payment in October 2023.

Energy sector. The circular debt (CD) stock stabilized in late 2023 and early 2024, secured by continued efforts to bring energy tariffs in line with costs and, in the power sector, continued anti-theft measures. Power CD, at PRs 2.6 trillion (2.5 percent of GDP), has remained broadly flat since October 2023 after some slippage earlier in the fiscal year (due largely to lower-than-expected recoveries following the large annual tariff rebasing in July 2023). In the gas sector, the authorities implemented another significant (24 percent on average) gas tariff increase on February 15. The change maintained a progressive rate structure to protect vulnerable residential consumers; significantly increased and equalized prices for fertilizer companies in the system; and modestly increased prices for captive power and some industrial users.

PROGRAM PERFORMANCE

3. Overall performance against end-December quantitative performance criteria (QPCs), Indicative Targets (ITs), and Structural Benchmarks (SBs) under the SBA was satisfactory (LOI Tables 1–2, Annex I).

Performance Criteria (PCs). The authorities met all seven quantitative PCs for end-December 2023: the floors on (i) net international reserves of the SBP; and (ii) targeted cash transfer spending; and the ceilings on (iii) net domestic assets of the SBP; (iv) the SBP’s FX swap/forward book; (v) net government budgetary borrowing from the SBP; (vi) the general government primary budget deficit; and (vii) government guarantees. They also met both continuous PCs on (i) zero new flow of SBP credit to the government; and (ii) zero external public payment arrears.

Indicative targets (ITs). The authorities also met all four ITs for end-December 2023: the floors on (i) budgetary health and education spending; and (ii) FBR net tax revenues; and the ceilings on (iii) net accumulation of tax refund arrears; and (iv) power sector payment arrears.

Structural benchmarks (SBs). The SBs on (i) the BISP inflation adjustment; (ii) notification of the semiannual gas tariff adjustment determination; and (iii) development of a plan to strengthen the SBP’s internal control systems in lending operations were met. The continuous SBs on (i) not granting further tax amnesties; (ii) avoiding new preferential tax treatments or exemptions; and (iii) maintaining an average premium of no more than 1.25 percent between the interbank and open market rate were also met. Work toward amending four dedicated SOE laws (missed SB, end-November 2023) remains in progress to align legislation with requirements; the timing of its passage is contingent on the recently-seated National Assembly.

OUTLOOK AND RISKS

4. The baseline macroeconomic outlook is broadly in line with the first review’s projections, (Tables 1–7):

Pakistan: Selected Economic Indicators, FYs 2129 1/

2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29

Proj.

Real GDP growth (%) 5.8 6.2 -0.2 2.0 3.5 4.5 5.0 5.0 5.0

Consumer prices (period average, % change) 8.9 12.1 29.2 24.8 12.7 7.6 6.5 6.5 6.5

Gen. gov. overall balance (incl. grants, % of GDP) -6.0 -7.8 -7.8 -7.4 -7.4 -5.8 -5.2 -4.7 -4.6

Gen gov. primary balance (underlying, excl. grants, % of GDP) 2/ -0.5 -2.3 -0.8 0.4 0.4 0.4 0.4 0.4 0.4

Gen. gov. debt (incl. IMF obligations, % of GDP) 73.5 76.2 77.1 72.1 70.0 68.8 67.2 65.3 63.5

Current account balance (% of GDP) -0.8 -4.7 -0.7 -0.8 -1.2 -1.2 -1.3 -1.4 -1.5

Gross official reserves (billions of US$) 17.3 9.8 4.5 9.0 13.4 16.9 19.1 20.2 22.0

Gross official reserves (months of next year’s G&S imports) 2.5 2.0 0.8 1.5 2.1 2.5 2.7 2.7 2.7

Gross official reserves (% of IMF ARA meteric) 3/ 72.6 41.3 19.5 40.9 56.4 68.4 73.8 72.5 78.1

Sources: Pakistani authorities; IMF staff estimates and projections.

1/ The fiscal year (FY) runs from July 1 through June 30.

2/ Excludes one-off transactions, incl. asset sales (Tables 4a and b).

3/ With flexible exchange rate and no capital controls.

Inflation developments have generally been close to the first review’s expectations, but food inflation has slowed somewhat more gradually than anticipated. As a result, year-end inflation in FY24 and FY25 has been revised up modestly.

Balance of Payments. For FY24, the current account deficit (CAD) is projected at US$3.0 billion (0.8 percent of GDP), somewhat lower than projected at the first review. A more muted import rebound is now expected, reflecting favorable commodity price changes and a larger than anticipated drop in food and cotton imports given the domestic agricultural recovery, while exports are slightly higher. Staff expects the CAD to remain around 1½ percent of GDP over the medium term, reflective of a flexible exchange rate consistent with efforts to rebuild reserves.

Public debt. The end-FY24 debt-to-GDP ratio is projected to decrease markedly, driven by fiscal consolidation and ex-post negative real interest rates. That said, risks to debt sustainability remain acute given very large gross financing needs and the persistent challenges in obtaining external financing, and that real interest rates are projected to become an adverse driver of debt dynamics in the coming years. Provided that program policies are sustained over the medium term and assuming adequate multilateral and bilateral financial support, public debt would remain sustainable and on a downward path.

5. Downside risks remain exceptionally high. While the new government has indicated its intention to continue the SBA’s policies, political uncertainty remains significant. A resurgence in social tensions (reflecting the complex political scene and high cost of living) could weigh on policy and reform implementation. Policy slippages, together with lower external financing, could undermine the narrow path to debt sustainability and place pressure on the exchange rate. Delays in post-program external financing disbursements would also place further pressure on banks to finance the government (further exacerbating crowding out of the private sector). Geopolitically- driven higher commodity prices and disruptions to shipping, or tighter global financial conditions, would also adversely affect external stability

POLICY DISCUSSIONS

A. Fiscal Policy

6. The authorities remain committed to achieving a FY24 general government primary surplus of at least PRs 401 billion (0.4 percent of GDP), which will require steadfast effort. While the FY24H1 fiscal targets were met, rapid provincial spending, small additional federal current expenditure, and a shortfall in anticipated SBP profits (0.1 percent of GDP) require:

Strengthening revenue collection to ensure alignment with the FY24 budget. The annual FBR revenue targets remain unchanged but there are risks of shortfalls in April and May 2024 due to holidays that will see port closures and weigh on revenue collection. Agreed contingency measures will be adopted should collections fall short. Additional efforts are also needed to meet the SBA’s revenue administration goals. Efforts to collect additional revenue from retailers have been delayed, and challenges continue in the tobacco sector where, despite the mandatory implementation of track-and-trace systems, smuggling and clandestine production continue despite efforts to curtail informal production and imports. The FBR is expanding its track-and-trace system to additional commodities such as sugar, fertilizer, and cement to tighten control over informal markets in these sectors. The FBR has, however, successfully registered 1.1 million new filers, from which 170,999 new returns have been obtained through enforcement measures, with the remainder coming voluntarily.

Containing primary expenditure to PRs 12,912 billion (12.1 percent of GDP) while preserving space for priority social spending. As foreshadowed in the first review, federal PSDP was reduced by PRs 61 billion to offset the SBP profit shortfall and further projected savings (PRs 40 billion) are expected from rationalization of unnecessary subsidies. Conversely, additional expenditures of PRs 49 billion are expected, mainly due to unanticipated increases in the military wage and pension bills. The authorities reaffirmed their commitment to stay within the overall primary expenditure envelope, avoid any supplementary grants, and use the PRs 250 billion budgeted emergency fund to absorb budget deviations.

Continued fiscal coordination with provincial governments. The provinces have reiterated their commitment to achieving their FY24 budget surplus targets as specified in their December 2023 MoUs with the federal government. Punjab, in particular, has pledged to further contain current and development expenditures for the remainder of FY24. Sindh will continue settlement of its accumulated commodity debt over coming years with a total of PRs 63 billion allocated for principal payments in FY24 (PRs 40 billion scheduled for FY24H2). The federal government will maintain an ongoing dialogue with each province to ensure their plans remain consistent with the general government fiscal goal.

7. The authorities are moving forward with plans to privatize Pakistan International Airlines (PIA) and other assets and have advanced their broader privatization agenda. The authorities aim to complete, by June 2024, the bidding for PIA’s core business, of which the government would likely seek to sell a (controlling) 51 percent stake. To limit state balance sheet implications, the use of divestment proceeds would prioritize the settling of government- guaranteed debt—to be transferred from PIA’s balance sheet to a holding company—held by commercial banks (PRs 242 billion, of a total of PRs 629 billion in liabilities to be transferred). Several smaller SOEs are also currently on an active privatization list.

8. Fiscal structural reforms remain essential to longer-term fiscal sustainability:

Strengthening revenue mobilization through tax policy reforms and enhanced revenue administration. Implementation of some reforms started by the caretaker government have been delayed, and renewed efforts are needed to expedite their execution. The anticipated launch of a scheme to register retailers and enforce filing and collection of their tax obligations, initially scheduled for January 1, 2024, has been postponed. The authorities published the Statutory Regulatory Order (SRO), which creates the legal framework for the scheme, on March 30, 2024. The first phase, involving registration, has started, and tax collection will begin by July 1, 2024. Plans to transform the FBR into a semi-autonomous Revenue Authority have been delayed so that an international consulting firm can be engaged for final reforms. Despite these setbacks, there has been progress in other areas, such as the passage of the documentation law mandating data sharing with the FBR and collaboration with NADRA to ensure secure data transmission. The Compliance Risk Management team, which focuses on the identification and audit of high-risk cases, has identified 39 cases, with 31 audited, with projected additional revenues of at least PRs 40 billion. Plans are in place to extend risk management training to local offices across provincial capitals and Islamabad. The framework for the digital invoicing system is established, though implementation challenges led to a second licensing round, expected to conclude by June 30, 2024.

Enhancing Public Financial Management (PFM). The authorities agreed to prepare quarterly reports comparing budget projections with actual execution and undertake corrective measures in response to any significant deviations. The authorities have committed not to issue any supplementary grants, and instead seek ex-ante approval from the National Assembly for any non-budgeted expenditures exceeding the parliamentary-approved FY24 budget appropriation. To enhance federal-fiscal reporting and coordination with the provinces over budget execution, standardized monthly data reporting templates have been established and a first set of data shared.

Increasing spending transparency. Federal ministries and provincial agencies continue to increase utilization of the electronic procurement system (e-PADS), with PRs 1,587 billion of planned procurement entered into the system. Continued public access to suppliers’ beneficial ownership information and a future audit by the Auditor General of Pakistan will further promote spending transparency and prevent corruption and misappropriation.

Improving debt management. The initial primary issuances of Shariah-compliant instruments via the Pakistan Stock Exchange in December 2023, with the goal of deepening financial markets and widening the investor base for domestic securities, received ample interest from investors. However, since the initial auction, interest savings for the government have been limited as rates across government securities markets converged. Staff and the authorities agreed that a ceiling on government guarantees remains a key tool for limiting debt risks outside of the general government perimeter, and the authorities have advanced work to include SOE debts related to commodity operations in the guarantee perimeter.

B. Poverty Reduction and Social Protection

9. The authorities are on pace to execute the FY24 BISP envelope of PRs 472 billion (0.4 percent of GDP), a significant increase over FY23 BISP spending. The larger envelope allowed the program to absorb another 300,000 families into the Kafaalat UCT program this fiscal year, bringing total enrollment to 9.3 million. The benefit adjustment carried out in January (end-January 2024 SB) protected the scheme’s generosity level, which remains low by international standards. Such adjustments should be institutionalized to at least maintain generosity levels in real terms.

10. Improving health and education outcomes means accelerating enrollment into, and improving the quality of, the BISP conditional cash transfer (CCT) programs. In FY24 0.9 million families and 1.9 million children, respectively, have been enrolled into these health and education CCT programs. Health and education spending outside of BISP, for which the end-December 2023 target was met, should be protected and fully executed as budgeted for the rest of FY24. Pakistan’s progressive energy tariff structure continues to protect the most vulnerable, but in the long term this should be replaced by BISP cash transfers.

11. The authorities continue to improve BISP’s administrative apparatus. The authorities aim to have 20 million households in the fully operational dynamic registry by September 2024, at which point the next recertification cycle will proceed. BISP has updated its contracts with banks to expand coverage across the country, enhance payment efficiency, and reduce administrative costs.

C. Monetary, Exchange Rate, and Financial Sector Policies

12. Continuing a tight monetary stance is critical to durably entrench disinflation and demonstrate that the monetary policy framework is fit for purpose. Considering the risks to inflation and the criticality of re-anchoring expectations to the SBP’s medium-term inflation objective, staff welcomed the MPC’s decision to keep policy rates on hold. The authorities agreed that any loosening of the policy stance should be supported by further evidence that inflation remains on a declining trend, pass-through remains contained, and possible exchange rate pressures from FX market normalization are limited. Guiding inflation down successfully is critical to reinvigorating public confidence in a consistent and effective monetary policy framework, with (i) the primacy of the medium-term inflation objective; (ii) the interest rate as the main policy tool (rather than the exchange rate as an intermediate tool); and (iii) monetary transmission operating, albeit slowly, through the standard channels.

13. The authorities are committed to a flexible exchange rate and a transparent interbank FX market, which are needed to support external sector rebalancing and the rebuilding of reserves. Staff welcomed the elimination of the remaining MCP and the exchange restriction, and steps to modernize the FX market environment. Staff recommended continuing to proactively build reserves via interbank purchases, and positively noted that the reduction of the SBP’s swap/forward position aided the decompression of forward premia. However, the recent stability of the rupee should not lead to renewed expectations that this will persist in the future. In this regard, banks should be free to transact in the interbank FX market without any constraints, which together with the SBP’s efforts to improve its functioning, would help build a deeper FX market that can serve as a buffer for shocks.

14. Close monitoring of the banking sector and addressing undercapitalized institutions remains essential. Amendments to the bank resolution and deposit insurance legislation will further strengthen Pakistan’s crisis management and bank resolution framework. With the National Assembly elected, the reform package, in line with Fund TA, should be swiftly adopted and operationalized by the SBP, for which the first steps have already been taken. The authorities again reported mixed progress on the three undercapitalized banks. More progress was made in winding down an undercapitalized public bank, with almost all deposits repaid and branches closed,

although the commencement of liquidation procedures faced some delay. Two private banks remain undercapitalized, despite some initial progress in partially recapitalizing one bank, with the authorities continuing to pursue options with the shareholders. Regarding vulnerabilities in the microfinance sector, the authorities have asked owners to provide time-bound recapitalization plans where necessary. This approach has been successful in returning two institutions to regulatory minimum standards. Staff welcomed work on a plan to strengthen internal control systems in the SBP’s lending operations but urged that the counterparty eligibility policy include a requirement that counterparties are financially sound.

D. Energy Sector Policy

15. Timely implementation of scheduled tariff adjustments, full disbursement of budgeted FY24 power subsidies, and broader reform efforts are critical to restoring energy sector viability.

Power sector

o With the April 1, 2024 notification of the delayed Q2 FY24 quarterly tariff adjustment, the continuation of anti-theft efforts, and the release of budgeted subsidies, the authorities should be able to meet their FY24 CDMP target of PRs 2.3 trillion (net zero stock accumulation).

Timely notification of the FY25 annual rebasing will be critical to the continued prevention of further CD flow, as will further collections efforts, including steps to enhance and institutionalize digital monitoring. In parallel, the authorities should press ahead with agricultural tube well subsidy reform, for which a finalized plan is targeted by end-FY24.

o However, restoring energy sector viability requires strong cost-side reforms. This includes (i) continuing efforts underway to improve transmission infrastructure, including for better integration and expansion of renewable energy capacity; (ii) improving DISCO performance via either privatization or long-term management concessions; (iii) moving captive power demand to the grid; (iv) revisiting, where feasible, the terms of power purchase agreements; and (v) continuing to convert publicly-guaranteed PHPL debt into cheaper public debt.

Gas sector: After some delays, the resumption of gas tariff adjustments in line with cost recovery has contributed to a modest decline in natural gas CD, to PRs 2,083 billion (2.0 percent of GDP) as of January 2024.7 Continued timely gas tariff determinations and notifications within the required 40-day window, while protecting vulnerable households, starting with the June 2024 semiannual adjustment, are critical to preventing further CD flow. Price adjustments should continue to move toward the full phasing out of captive power usage this year, with cheaper natural gas prioritized for the most efficient power plants. They should also include efforts to fully equalize gas prices for all fertilizer companies. The authorities signaled an intention to move toward fully implementing a weighted average cost of gas (WACOG) across Pakistan, which would introduce a uniform gas price while helping to ensure cost recovery.

E. Structural Policies

16. Further progress on the structural agenda is needed to achieve long-term sustainability and inclusive growth. Key aspects of the agenda include:

Enhancing SOE effectiveness. The authorities are implementing the SOE Act and SOE policy framework, including (i) an effective updating of the March 2021 SOE Triage Plan to propose which SOEs are to be retained, privatized, and/or restructured; (ii) a review of any required governance restructuring to align with the new provisions; (iii) furthering amendments for four statutory SOEs to be brought into line with the SOE Act (a missed SB for end-November 2023). The authorities anticipate then moving on to the remaining 16 statutory SOEs; (iv) the issuance of legal guidelines and training for SOEs on the application of the new framework; and (v) the further operationalization of the Central Monitoring Unit (CMU), which published its first SOE Report in December 2023. The CMU’s next report in June 2024 should make further progress toward reporting elements required by the SOE Act; progress against performance benchmarks is expected in later reports in FY25.

Further clarifying the classification and governance arrangements for the seven SOEs under the Sovereign Wealth Fund established in August 2023, which is not yet operational but which exempts these SOEs from the SOE Act. Governance safeguards for these SOEs should be brought on par with the SOE Act and its framework.

Building a level investment- and job-friendly business environment. The Special Investment Facilitation Council (SIFC) created in August 2023, aimed at attracting and facilitating investment in Pakistan, requires safeguards to bring projects identified through the SIFC under Pakistan’s existing PIMA framework to ensure accountability and transparency. This is particularly important given the SIFC’s power to offer regulatory relief and other immunities and the centrality of a level playing field for all investors.

Strengthening anti-corruption institutions. Safeguarding the independence of anti-corruption institutions and enhancing their effectiveness in combating corruption will help protect public funds, improve the business climate, and boost public and donor confidence. The authorities are committed to publishing, as soon as they are finalized, the anti-corruption framework review by the Ministry of Justice and Law task force, with participation of independent experts, and the full UNCAC review report after its finalization. Further training and engagement with banks to leverage their access to the FBR’s database of asset declarations of high-level public officials for AML/CFT purposes can prevent, detect, and deter laundering of proceeds of corruption, tax evasion, and smuggling through the financial sector. A digital portal will help efficiently facilitate access requests by banks and the FBR’s responses, which are still low relative to the risks. Public access to asset declarations of elected and unelected Federal Cabinet members is also expected to be institutionalized. Undertaking a comprehensive governance diagnostic assessment in the future will help the authorities identify severe governance vulnerabilities and prioritize key anti- corruption structural reforms.

Continued progress on building climate resilience. Following the cabinet’s adoption of the C- PIMA action plan (SB end-December 2023), the authorities are moving forward on near-term agenda items that target climate-related investment and urban planning, project selection, fiscal risk analysis, and capacity building. Beyond the C-PIMA, the authorities have drafted and plan to submit to parliament carbon market policy guidelines and aim to have developed a climate scoring methodology for National Adaptation Plan-aligned projects in the PSDP portfolio by September 2024.

PROGRAM MODALITIES AND CAPACITY TO REPAY

17. Financing. The program is fully financed and the reserve position at end-FY24 is consistent with program objectives (Table 3a). While total delivery of the SBA financing commitments in FY24 is expected to fall somewhat short of projections in the SBA request (US$4.0 billion out of the US$4.6 billion have been disbursed), with some disbursements spilling into FY25, this has been compensated by a tighter current account and savings from a debt rearrangement with a major bilateral creditor prior to the first review. Nonetheless, given Pakistan’s external sector vulnerabilities, it is important that the remaining commitments are delivered in a timely way. Over the medium-term, risks arise from large public sector external rollover needs, a persistent current account deficit, a difficult external environment for Eurobond and Sukuk issuance, and limited reserve buffers.

18. Capacity to repay. Pakistan’s capacity to repay the Fund is subject to significant risks and remains critically dependent on policy implementation and timely external financing. The Fund’s exposure reaches SDR 6,546 million (322 percent of quota, approximately 102 percent of projected gross reserves at end-April 2024) with completion of all purchases under the SBA (Table 8). Exceptionally high risks—notably from delayed adoption of reforms, high public debt and gross financing needs, low gross reserves and the SBP’s net FX derivative position, a decline in inflows, and sociopolitical factors—could jeopardize policy implementation and erode repayment capacity and debt sustainability. Restoring external viability is critical to ensure Pakistan’s capacity to repay the Fund, and hinges on strong policy implementation, including, but not limited to, external asset accumulation and exchange rate flexibility. Geopolitical instability is an additional source of risk, even as uncertainty surrounding global financial conditions has declined somewhat since the last review.

19. Enterprise risk. The SBA poses significant enterprise risks which are largely unchanged from the time of the first review. These include risks related to credit concentration, capacity to repay, reputation and engagement, sociopolitical tensions, and the security situation. In addition to the factors discussed in the first review, there is further mitigation from the newly formed government’s intention to continue the policy adjustment after the SBA, and interest in a successor arrangement from the Fund, although political uncertainty remains significant.

STAFF APPRAISAL

20. Consistent implementation of stronger policies over the past nine months has brought the economy back from the brink and onto a path of stability. A gradual economic recovery has increasingly taken hold and inflation has declined substantially in recent months, though remaining well above target. The SBP has taken advantage of increased inflows, easing external pressures, and the moderation of the current account deficit to begin rebuilding FX reserves. Fiscal performance

has also improved, with the government posting a large primary surplus in H1. This overall satisfactory performance suggests that unwavering and consistent policy implementation can bring positive results, rebuild confidence, and support economic recovery.

21. Although this SBA broadly achieved its narrow objectives, the challenges ahead remain uncomfortably high and will require sustained efforts to effectively address them. Pakistan’s fiscal and external vulnerabilities remain very high, including debt sustainability and refinancing risks as well as crowding out of the private sector, and structural weaknesses constrain productivity, investments, and growth. The SBA recognized that resolving Pakistan’s structural challenges will require continued adjustment and creditor support beyond the program period. It is now critically important that the effort that started under this SBA continues. In this regard, the authorities’ interest in a successor arrangement is welcomed to anchor the policy adjustment in the coming years, restore Pakistan’s medium-term sustainability, and pave the way for strong and inclusive growth.

22. The caretaker government should be commended for its decisive efforts to meet the FY24 primary surplus target, overcoming political cost considerations, and these efforts should continue to put debt on a firm downward trajectory. Ensuring strict budget compliance and fostering close coordination with the provinces is critical to mitigate significant risks to macroeconomic stability and fiscal sustainability. There is an urgent need to accelerate the adoption and implementation of structural reforms aimed at enhancing revenue mobilization and spending efficiency. Securing ex-ante approval from the National Assembly for any budget deviation will bolster the authorities’ credibility and budget transparency.

23. Notable progress made on strengthening social spending and institutions to alleviate poverty and effectively protect the most vulnerable is welcome and must continue beyond this program. Efforts to maintain, if not increase, generosity levels in real terms via annual inflation indexation going forward and to expand CCT programs where possible are welcome, as are continued improvements in BISP’s administrative capacity.

24. With inflation still well above target, monetary policy should remain appropriately tight and vigilant against emerging pressures. The recent deceleration of inflation is welcome and will reduce the high burden on Pakistani society, and particularly the most vulnerable. Monetary policy should remain data-driven and attentive of stickiness in core inflation, as well as resolutely address any emerging risk. Guiding inflation back to target is imperative not only to buttress a sustainable recovery but also to build central bank credibility.

25. A flexible exchange rate resulting from a deep and well-functioning FX market is critical to buffer external shocks and allow the rebuilding of FX reserves. The authorities’ resolve in eliminating the remaining MCP and the exchange restriction and efforts to improve the functioning of the FX market are welcome. Efforts should continue to achieve greater FX market depth, while proactively rebuilding reserves via interbank purchases as conditions permit. The external position of Pakistan in FY23 was broadly in line with the level implied by medium-term fundamentals and desirable policies.

26. Maintaining financial sector stability requires continued vigilance, and actions to address undercapitalized institutions are long overdue. This includes ensuring all banks and microfinance banks are compliant with the minimum capital requirements or otherwise exit the market in an orderly fashion. The long noncompliance of banks with those requirements risks undermining the credibility of banking supervision and prudential standards. Passing the legal reform of the crisis management framework remains crucial to ensure the authorities have the appropriate powers and toolkit to deal with weak institutions.

27. Recent energy tariff increases represent major steps to prevent further CD arrears, but broader cost-side reforms are critical for sectoral viability. The regularization of energy tariff increases, in line with costs and legal requirements, represents a major step for the authorities in addressing Pakistan’s energy crisis. However, the only sustainable solution for the sector is decisive action to address cost-side and infrastructure issues.

28. Structural reforms must progress to create a basis for sustainable and inclusive growth. The progress made on the SOE reform agenda is an important step toward reducing the footprint of the state and spurring private sector growth. Momentum in this area must be continued and further steps need to be taken to ensure a level playing field with regard to the investment environment. Effective and independent anti-corruption institutions and tools (e.g, asset declarations) and AML/CFT measures, which could be further supported by a future governance diagnostic assessment, are critical to safeguarding public funds, inclusive growth, and political stability. Sustainable growth also requires building up climate resilience.

29. Downside risks remain exceptionally high. The external environment remains challenging, with still tight global financial conditions, volatile commodity prices, and elevated geopolitical tensions. External and domestic financing needs in coming years are very large, and policy adjustment will need to be sustained in the post-SBA period to materialize this financing and prevent a re-intensification of fiscal and balance of payments pressures.

30. On the basis of the authorities’ program implementation and policy commitments, staff supports the authorities’ request for completion of the second review under the SBA.

Table 1. Pakistan: Selected Economic Indicators, 2018/192024/25 1/

Population: 231.6 million (2022/23) Main exports: Textiles (US$16.5 billion, 2022/23)

Per capita GDP: US$1,446.3 (2022/23) Unemployment: 6.2 percent (2021/22)

Poverty rate: 21.9 percent (at national line; 2018/19)

2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Est. Prog. Proj. Proj.

Output and prices (Annual percentage change)

Real GDP at factor cost 3.1 -0.9 5.8 6.2 -0.2 2.0 2.0 3.5

GDP deflator at factor cost 9.2 9.9 10.4 14.1 26.1 24.0 24.8 12.7

Consumer prices (period average) 6.7 10.7 8.9 12.1 29.2 24.0 24.8 12.7

Consumer prices (end of period) 8.0 8.6 9.7 21.3 29.4 18.5 19.6 9.5

Pakistani rupees per U.S. dollar (period average) 24.0 16.0 1.2 11.0 39.8 … … …

Pakistani rupees per U.S. dollar (end of period) 31.7 5.0 -6.3 30.0 39.6 … … …

Saving and investment (Percent of GDP)

Gross saving 11.3 13.3 13.7 10.7 13.0 12.0 11.4 11.6

Government -5.5 -4.7 -3.9 -5.4 -5.5 -5.7 -5.5 -5.3

Nongovernment (including public sector enterprises) 16.8 18.1 17.6 16.1 18.5 17.7 16.9 16.9

Gross capital formation 2/ 15.5 14.8 14.5 15.4 13.7 13.6 12.2 12.7

Government 2.3 2.3 2.2 2.4 2.3 2.0 1.9 2.1

Nongovernment (including public sector enterprises) 13.2 12.5 12.4 13.0 11.5 11.6 10.3 10.7

Public finances

Revenue and grants 11.3 13.3 12.4 12.1 11.4 12.5 12.5 12.4

Expenditure (including statistical discrepancy) 19.1 20.3 18.5 20.0 19.2 20.2 20.0 19.8

Budget balance (including grants) -7.8 -7.0 -6.0 -7.8 -7.8 -7.6 -7.4 -7.4

Budget balance (excluding grants) -7.9 -7.1 -6.1 -7.9 -7.8 -7.7 -7.5 -7.4

Primary balance (excluding grants) -3.1 -1.6 -1.2 -3.1 -1.0 0.4 0.4 0.4

Underlying primary balance (excluding grants) 3/ -3.1 -1.6 -0.5 -2.3 -0.8 0.4 0.4 0.4

Total general government debt excl. IMF obligations 75.4 76.8 71.4 74.1 74.7 70.3 69.6 68.1

External general government debt 28.1 27.9 24.4 27.4 28.5 27.4 26.2 25.0

Domestic general government debt 47.3 49.0 47.0 46.6 46.2 42.9 43.3 43.2

General government debt incl. IMF obligations 77.5 79.6 73.5 76.2 77.1 72.8 72.1 70.0

External general government debt 30.2 30.6 26.5 29.5 30.9 30.0 28.8 26.8

Domestic general government debt 47.3 49.0 47.0 46.6 46.2 42.9 43.3 43.2

General government and government guaranteed debt (incl. IMF; % GDP) 82.0 84.5 77.8 80.7 81.3 76.8 76.0 73.6

Monetary sector (Annual changes in percent of initial stock of broad money, unless otherwise indicated)

Net foreign assets -8.1 5.6 5.9 -6.1 -7.0 1.1 1.2 4.6

Net domestic assets 19.4 11.9 10.3 19.7 21.2 9.9 12.3 17.4

Credit to the private sector 4.5 1.1 3.8 5.5 0.8 1.5 1.0 5.4

Net claims on the government 13.4 12.4 8.2 13.8 13.5 17.8 18.1 14.9

Broad money (percent change) 11.3 17.5 16.2 13.6 14.2 11.0 13.5 22.0

Reserve money (percent change) 19.9 16.8 12.8 7.7 22.4 11.0 11.0 25.7

Private credit (percent change) 11.9 3.0 11.5 17.4 2.3 5.0 3.5 20.0

Six-month treasury bill rate (period average, in percent) 10.2 11.9 7.3 11.0 18.3 … … …

External sector (Annual percentage change, unless otherwise indicated)

Merchandise exports, U.S. dollars -2.1 -7.1 13.8 26.7 -14.2 8.8 11.9 4.3

Merchandise imports, U.S. dollars -6.8 -15.9 24.4 31.8 -27.5 12.4 6.0 10.0

Current account balance (in percent of GDP) -4.2 -1.5 -0.8 -4.7 -0.7 -1.6 -0.8 -1.2

Financial account (billions of U.S. dollars) 11.8 6.5 8.3 10.2 -2.5 9.3 6.5 10.3

(Percent of exports of goods and services, unless otherwise indicated)

External public and publicly guaranteed debt 277.2 312.6 301.5 245.4 258.9 258.9 247.1 246.3

Debt service 40.8 51.5 34.1 37.5 57.8 40.0 39.6 39.8

Gross reserves (in millions of U.S. dollars) 4/ 7,274 12,175 17,297 9,821 4,455 9,101 9,029 13,364

In months of next year’s imports of goods and services 1.7 2.3 2.5 2.0 0.8 1.5 1.5 2.1

Memorandum items:

Underlying fiscal balance (excl. grants; % GDP) 3/ -7.9 -7.1 -5.5 -7.1 -7.6 -7.5 -7.6 -7.5

Net general government debt (incl. IMF; % GDP) 70.2 72.9 66.0 69.9 72.1 68.9 68.2 66.6

Real effective exchange rate (annual average, percentage change) -11.5 -4.0 2.0 -1.2 -5.9 … … …

Real effective exchange rate (end of period percentage change) -15.0 3.5 7.2 -6.0 -8.0 … … …

Terms of trade (percentage change) -1.7 2.3 2.1 -1.2 -1.5 -5.8 -4.8 0.7

Real per capita GDP (percentage change) 1.1 -2.9 3.7 4.1 -2.1 0.0 0.0 1.5

GDP at market prices (in billions of Pakistani rupees) 43,798 47,540 55,836 66,640 84,069 106,577 106,679 124,813

Per capita GDP (in U.S. dollars) 1,485.8 1,362.9 1,550.1 1,634.4 1,446.3 … … …

Population (millions) 214.0 218.2 222.6 227.0 231.6 236.2 236.2 240.9

GDP at market prices (in billions of U.S. dollars) 321.1 300.4 348.5 374.7 338.2 … … …

Table 2. Pakistan: Medium-Term Macroeconomic Framework, 2019/202028/29 1/

2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29

Prog. Est. Prog. Proj. Proj.

(Annual percentage change, unless otherwise indicated)

Output and prices

Real GDP at factor cost -0.9 5.8 6.2 -0.2 -0.2 2.0 2.0 3.5 4.5 5.0 5.0 5.0

Net exports (percent contribution to real GDP at factor cost) 1.2 -2.2 -1.8 5.8 5.8 -0.9 0.2 -1.4 -0.3 -0.5 -0.5 -0.5

GDP deflator at factor cost 9.9 10.4 14.1 26.1 26.1 24.0 24.8 12.7 7.6 6.5 6.5 6.5

Consumer prices (period average) 10.7 8.9 12.1 29.2 29.2 24.0 24.8 12.7 7.6 6.5 6.5 6.5

(Percent of GDP)

Saving and investment balance -1.5 -0.8 -4.7 -0.7 -0.7 -1.6 -0.8 -1.2 -1.2 -1.3 -1.4 -1.5

Government -7.0 -6.0 -7.8 -7.7 -7.8 -7.6 -7.4 -7.4 -5.8 -5.2 -4.7 -4.6

Nongovernment (including public sector enterprises) 5.6 5.2 3.2 7.1 7.1 6.0 6.6 6.2 4.6 3.8 3.3 3.1

Gross national saving 13.3 13.7 10.7 13.0 13.0 12.0 11.4 11.6 12.4 12.6 12.5 12.2

Government -4.7 -3.9 -5.4 -5.5 -5.5 -5.7 -5.5 -5.3 -3.8 -3.1 -2.6 -2.6

Nongovernment (including public sector enterprises) 18.1 17.6 16.1 18.5 18.5 17.7 16.9 16.9 16.1 15.7 15.1 14.8

Gross capital formation 14.8 14.5 15.4 13.7 13.7 13.6 12.2 12.7 13.6 13.9 13.9 13.7

Government 2.3 2.2 2.4 2.2 2.3 2.0 1.9 2.1 2.1 2.1 2.1 2.1

Nongovernment (including public sector enterprises) 12.5 12.4 13.0 11.5 11.5 11.6 10.3 10.7 11.5 11.8 11.8 11.7

(Billions of U.S. dollars, unless otherwise indicated)

Balance of payments

Current account balance -4.4 -2.8 -17.5 -2.2 -2.2 -5.6 -3.0 -4.6 -5.0 -6.0 -6.9 -7.8

Current account balance (in percent of GDP) -1.5 -0.8 -4.7 -0.7 -0.7 -1.6 -0.8 -1.2 -1.2 -1.3 -1.4 -1.5

Net capital flows 2/ 6.9 7.9 10.1 -3.1 -3.1 9.0 6.2 10.4 9.2 9.3 10.2 11.2

Of which: foreign direct investment 3/ 2.7 1.6 1.7 0.6 0.6 0.7 0.8 1.3 1.5 1.9 2.3 2.7

Gross reserves 12.2 17.3 9.8 4.5 4.5 9.1 9.0 13.4 16.9 19.1 20.2 22.0

In months of imports 4/ 2.3 2.5 2.0 0.8 0.8 1.5 1.5 2.1 2.5 2.7 2.7 2.7

External debt (in percent of GDP) 37.6 35.1 32.2 34.4 34.8 34.9 33.7 33.9 33.1 31.9 30.3 28.8

Terms of trade (annual percentage change) 2.3 2.1 -1.2 -1.3 -1.5 -5.8 -4.8 0.7 -3.0 -0.5 0.0 -0.3

Real effective exchange rate (annual average, percentage change) -4.0 2.0 -1.2 -5.9 -5.9 … … … … … … …

Real effective exchange rate (end of period, percentage change) 3.5 7.2 -6.0 -8.0 -8.0 … … … … … … …

(Percent of GDP)

Public finances

Revenue and grants 13.3 12.4 12.1 11.4 11.4 12.5 12.5 12.4 12.4 12.4 12.4 12.4

Of which: tax revenue 10.0 10.3 10.4 10.0 10.0 10.6 10.6 10.7 10.7 10.7 10.7 10.7

Expenditure (including statistical discrepancy) 20.3 18.5 20.0 19.2 19.2 20.2 20.0 19.8 18.2 17.6 17.1 17.0

Of which: current 18.1 16.3 17.3 17.3 17.2 18.0 17.9 17.7 16.1 15.4 15.0 14.9

Of which: development 2.3 2.2 2.4 2.2 2.3 2.0 1.9 2.1 2.1 2.1 2.1 2.1

Primary balance (including grants) -1.5 -1.1 -3.0 -0.8 -0.9 0.4 0.4 0.5 0.4 0.4 0.4 0.5

Primary balance (excluding grants) -1.6 -1.2 -3.1 -0.8 -1.0 0.4 0.4 0.4 0.4 0.4 0.4 0.4

Underlying primary balance (excluding grants) 5/ -1.6 -0.5 -2.3 -0.6 -0.8 0.4 0.4 0.4 0.4 0.4 0.4 0.4

Budget balance (including grants) -7.0 -6.0 -7.8 -7.7 -7.8 -7.6 -7.4 -7.4 -5.8 -5.2 -4.7 -4.6

Budget balance (excluding grants) -7.1 -6.1 -7.9 -7.8 -7.8 -7.7 -7.5 -7.4 -5.9 -5.2 -4.7 -4.7

Underlying fiscal balance (excl. grants) 5/ -7.1 -5.5 -7.1 -7.5 -7.6 -7.7 -7.5 -7.4 -5.9 -5.2 -4.7 -4.7

General government and government guaranteed debt (incl. IMF) 84.5 77.8 80.7 81.3 81.3 76.8 76.0 73.6 72.2 70.4 68.2 66.3

General government debt (incl. IMF) 79.6 73.5 76.2 77.1 77.1 72.8 72.1 70.0 68.8 67.2 65.3 63.5

Net general government debt (incl. IMF) 72.9 66.0 69.9 72.1 72.1 68.9 68.2 66.6 65.8 64.6 62.9 61.3

Memorandum item:

Nominal GDP (market prices, billions of Pakistani rupees) 47,540 55,836 66,640 84,069 84,069 106,577 106,679 124,813 140,491 156,951 175,490 196,253

Table 3a. Pakistan: Balance of Payments, 2018/192028/29

(In millions of U.S. dollars, unless otherwise indicated)

2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29

Prog. Est. Prog. Proj. Proj.

Current account -13,434 -4,449 -2,820 -17,481 -2,235 -2,235 -5,649 -3,010 -4,554 -5,024 -5,955 -6,876 -7,772

Balance on goods -27,612 -21,109 -28,634 -39,050 -23,955 -23,955 -27,934 -23,758 -27,923 -29,269 -30,783 -32,634 -34,761

Exports, f.o.b. 24,257 22,536 25,639 32,493 27,879 27,879 30,327 31,204 32,556 34,412 36,747 38,943 41,394

Imports, f.o.b. 51,869 43,645 54,273 71,543 51,834 51,834 58,262 54,962 60,479 63,680 67,530 71,578 76,155

Services (net) -4,970 -3,316 -2,516 -5,840 -969 -969 -1,771 -1,772 -2,010 -2,630 -3,140 -3,756 -4,449

Services: credit 5,966 5,437 5,945 7,102 7,599 7,599 7,985 7,931 8,448 8,996 9,570 10,171 10,808

Of which: Coalition Support Fund 0 0 0 0 0 0 0 0 0 0 0 0 0

Services: debit 10,936 8,753 8,461 12,942 8,568 8,568 9,755 9,702 10,458 11,625 12,710 13,927 15,257

Income (net) -5,610 -5,459 -4,400 -5,248 -5,671 -5,671 -6,537 -6,741 -5,914 -6,487 -7,255 -7,671 -7,960

Income: credit 578 479 508 652 652 652 1,061 1,020 1,040 846 772 760 760

Income: debit 6,188 5,938 4,908 5,900 6,323 6,323 7,599 7,761 6,954 7,333 8,027 8,430 8,720

Of which: interest payments 3,683 3,540 2,594 3,375 4,901 4,901 5,396 5,405 5,620 5,870 6,304 6,398 6,545

Of which: income on direct investment 2,848 2,664 2,565 2,717 1,646 1,646 2,193 2,338 1,334 1,463 1,723 2,032 2,175

Balance on goods, services, and income -38,192 -29,884 -35,550 -50,138 -30,595 -30,595 -36,242 -32,271 -35,847 -38,385 -41,178 -44,061 -47,170

Current transfers (net) 24,758 25,435 32,730 32,657 28,360 28,360 30,594 29,261 31,293 33,361 35,223 37,185 39,398

Current transfers: credit, of which: 24,990 25,802 33,027 32,949 28,674 28,674 30,954 29,653 31,662 33,731 35,594 37,554 39,768

Official 761 468 281 376 380 380 409 431 410 410 410 410 410

Workers’ remittances 21,740 23,131 29,450 31,279 27,333 27,333 29,470 28,081 29,870 31,596 33,051 34,513 36,105

Other private transfers 2,489 2,203 3,296 1,294 961 961 1,075 1,141 1,382 1,725 2,132 2,631 3,253

Current transfers: debit 232 367 297 292 314 314 361 391 369 370 371 370 370

Capital account 229 285 224 205 375 375 221 225 157 100 100 100 100

Capital transfers: credit 229 288 224 205 375 375 221 225 157 100 100 100 100

Of which: official capital grants 219 273 204 190 144 144 215 220 157 100 100 100 100

Capital transfers: debit 0 3 0 0 0 0 0 0 0 0 0 0 0

Financial account 11,759 6,479 8,268 10,207 -2,487 -2,487 9,296 6,523 10,252 9,062 9,162 10,059 11,095

Direct investment abroad 74 54 -171 -234 -957 -957 -367 -32 0 0 0 0 0

Direct investment in Pakistan 1,362 2,598 1,819 1,936 1,547 1,547 1,056 827 1,258 1,521 1,902 2,310 2,695

Portfolio investment (net) -1,274 -409 2,774 -55 -1,012 -1,012 344 -119 2,962 3,932 4,812 5,212 5,212

Financial derivatives (net) 0 8 0 0 0 0 0 0 0 0 0 0 0

Other investment assets 67 127 -1,345 -2,613 1,029 1,029 -184 568 -640 -480 -320 0 0

Monetary authorities 0 0 0 0 0 0 0 0 0 0 0 0 0

General government -48 -48 -15 -914 883 883 0 5 0 0 0 0 0

Banks 92 -140 -608 -382 -218 -218 261 400 -320 -240 -160 0 0

Other sectors 23 315 -722 -1,317 364 364 -445 163 -320 -240 -160 0 0

Other investment liabilities 11,530 4,101 5,191 11,173 -3,094 -3,094 8,448 5,280 6,672 4,090 2,768 2,537 3,187

Monetary authorities 5,495 -498 -1,468 -1 0 0 999 999 0 0 0 0 0

General government, of which: 4,294 3,085 5,238 5,064 -3,245 -3,245 5,952 3,501 4,767 2,355 662 -747 -97

Disbursements 8,255 10,347 9,308 10,203 8,731 8,731 12,168 9,610 13,002 10,951 8,981 10,415 9,690

Amortization 5,982 7,299 5,855 8,343 11,660 11,660 6,209 6,166 8,234 8,596 8,320 11,162 9,787

Banks 467 -124 499 846 1,241 1,241 77 275 250 350 450 500 500

Other sectors 1,274 1,638 922 2,491 -1,090 -1,090 1,421 504 1,655 1,385 1,657 2,785 2,785

Net errors and omissions -58 150 -619 -303 -1,046 -1,046 -503 -527 0 0 0 0 0

Overall balance -1,631 2,465 5,053 -7,371 -5,384 -5,384 3,363 3,212 5,855 4,138 3,307 3,283 3,422

Financing 1,504 -2,465 -5,053 7,371 5,384 5,384 -3,363 -3,212 -5,855 -4,138 -3,307 -3,283 -3,422

Change in reserve assets (- denotes accumulation) 1,880 -4,554 -4,473 7,333 5,185 5,185 -4,728 -4,577 -4,335 -3,572 -2,185 -1,097 -1,774

Net use of Fund credit and loans (without augmentation) -376 2,089 -580 38 199 199 1,365 1,365 -1,521 -566 -1,121 -2,186 -1,648

Memorandum items:

Current account (in percent of GDP) -4.2 -1.5 -0.8 -4.7 -0.7 -0.7 -1.6 -0.8 -1.2 -1.2 -1.3 -1.4 -1.5

Current account (in percent of GDP; excluding fuel imports) 0.2 1.6 2.0 0.3 4.5 4.5 3.4 4.1 3.4 3.0 2.6 2.3 2.2

Exports f.o.b. (growth rate, in percent) -2.1 -7.1 13.8 26.7 -14.2 -14.2 8.8 11.9 4.3 5.7 6.8 6.0 6.3

Exports volume (growth rate, in percent) -1.7 -1.0 2.8 4.7 -11.8 -11.5 20.2 22.8 5.5 8.3 6.5 5.6 5.8

Remittance (growth rate, in percent) 9.2 6.4 27.3 6.2 -12.6 -12.6 7.8 2.7 6.4 5.8 4.6 4.4 4.6

Remittances (in percent of GDP) 6.8 7.7 8.5 8.3 8.1 8.1 8.4 7.8 7.8 7.7 7.4 7.2 7.0

Imports f.o.b. (growth rate, in percent) -6.8 -15.9 24.4 31.8 -27.5 -27.5 12.4 6.0 10.0 5.3 6.0 6.0 6.4

Imports volume (growth rate, in percent) -9.8 -12.0 20.2 10.9 -29.2 -29.1 15.9 9.7 12.0 5.8 6.1 5.5 5.5

Oil imports (in million US$, cif) 13,929 9,280 9,747 18,743 17,539 17,539 17,630 17,923 17,574 17,395 17,633 18,144 18,888

Terms of trade (growth rate, in percent) -1.7 2.3 2.1 -1.2 -1.3 -1.5 -5.8 -4.8 0.7 -3.0 -0.5 0.0 -0.3

Foreign Direct Investment (in percent of GDP) 0.4 0.9 0.5 0.5 0.5 0.5 0.3 0.2 0.3 0.4 0.4 0.5 0.5

External debt (in millions of U.S. dollars) 106,705 113,013 122,292 120,534 116,217 117,768 122,903 121,991 129,548 136,478 142,012 145,567 149,016

o/w external public debt 82,561 86,522 93,806 96,073 90,974 90,975 98,302 95,856 100,120 104,129 106,676 105,759 106,012

Gross external financing needs (in millions of U.S. dollars) 1/ 25,552 23,430 22,206 33,736 22,819 22,819 24,965 22,268 21,044 23,111 22,716 29,203 27,890

End-period gross official reserves (millions of U.S. dollars) 2/ 7,274 12,175 17,297 9,821 4,455 4,455 9,101 9,029 13,364 16,936 19,121 20,218 21,992

(In months of next year’s imports of goods and services) 1.7 2.3 2.5 2.0 0.8 0.8 1.5 1.5 2.1 2.5 2.7 2.7 2.7

GDP (in millions of U.S. dollars) 321,071 300,410 348,481 374,748 338,237 338,237 … … … … … … …

Sources: Pakistani authorities; and IMF staff estimates and projections.

1/ Defined as current account deficit, plus amortization on medium- and long-term debt, plus short-term debt at end of previous period.

2/ Excluding foreign currency deposits held with the State Bank of Pakistan (cash reserve requirements) and gold.

Table 3b. Pakistan: Gross Financing Requirements and Sources, 2018/192028/29

(In millions of U.S. dollars, unless otherwise indicated)

2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29

Prog. Est. Prog. Proj. Proj.

Gross External Financing Requirements (A) 25,552 23,430 22,206 33,736 22,819 22,819 24,965 22,268 21,044 23,111 22,716 29,203 27,890

(In percent of GDP) 8.0 7.8 6.4 9.0 6.7 6.7 7.1 6.1 5.5 5.6 5.1 6.1 5.4

Current account deficit 13,434 4,449 2,820 17,481 2,235 2,235 5,649 3,010 4,554 5,024 5,955 6,876 7,772

(In percent of GDP) 4.2 1.5 0.8 4.7 0.7 0.7 1.6 0.8 1.2 1.2 1.3 1.4 1.5

Amortization 11,742 18,236 18,306 15,240 19,617 19,617 17,675 17,614 14,970 17,521 15,640 20,141 18,470

Public Sector 6,982 12,799 13,943 11,343 14,971 14,971 13,780 13,738 11,234 13,396 11,320 15,662 13,787

Short-term Borrowing 1,538 1,182 784 532 1,327 1,327 1,211 850 2,389 2,800 2,928 2,928 2,928

Long-term Borrowing (non-IMF) 4,444 10,617 13,159 9,811 12,333 12,333 11,569 11,888 8,845 8,796 8,391 11,234 9,859

Bonds 1,000 1,000 0 1,000 1,311 1,311 1,000 1,000 0 1,800 0 1,500 1,000

Private Sector 1/ 4,760 5,437 4,363 3,897 4,646 4,646 3,895 3,876 3,736 4,125 4,320 4,479 4,683

Short-term Borrowing 3,474 3,610 3,110 2,786 2,983 2,983 2,812 2,612 2,783 2,738 2,933 3,092 3,296

Long-term Borrowing 1,286 1,827 1,253 1,111 1,663 1,663 1,083 1,265 953 1,387 1,387 1,387 1,387

IMF Repurchases 376 745 1,080 1,015 967 967 1,641 1,644 1,521 566 1,121 2,186 1,648

Available Financing (B) 21,103 24,890 26,826 25,208 16,282 16,289 26,583 23,833 25,379 26,682 24,901 30,300 29,664

Foreign Direct Investment (net) 2/ 1,436 2,652 1,648 1,702 590 590 689 795 1,258 1,521 1,902 2,310 2,695

Disbursement 19,496 21,811 25,573 20,839 16,363 16,370 26,176 23,340 23,964 25,062 22,899 27,890 26,869

From private creditors 8,366 14,822 11,932 10,762 7,271 7,278 6,659 6,261 13,862 15,317 14,349 19,406 18,386

Disbursement to Private Sector 3/ 4,268 11,445 4,645 3,713 5,065 5,072 4,381 3,968 6,962 7,111 7,918 10,975 11,180

Disbursement to Public Sector 4/ 4,098 3,377 7,287 7,049 2,206 2,206 2,278 2,293 6,900 8,206 6,431 8,431 7,206

From official creditors (non-IMF) 11,130 6,989 13,640 10,077 9,092 9,092 19,517 17,079 10,102 9,745 8,550 8,484 8,484

o/w Project Loans 2,673 1,799 1,933 1,899 1,899 1,899 3,721 3,835 2,702 2,788 1,821 1,755 1,755

o/w China 1,574 487 204 162 128 128 9 68 132 49 47 41 0

o/w Program Loans 288 3,666 2,120 1,514 2,341 2,341 3,000 1,407 3,500 2,460 2,232 2,232 2,232

o/w Short-term debt (incl. rollovers) 3,694 10,170 6,772 7,427 4,497 4,505 4,426 4,337 5,538 6,078 6,078 6,258 6,438

o/w Public Sector 1,643 2,774 2,954 4,444 1,517 1,517 2,494 2,389 2,800 2,928 2,928 2,928 2,928

o/w Private Sector 2,051 7,397 3,817 2,983 2,981 2,988 1,932 1,948 2,738 3,150 3,150 3,330 3,510

Other Net Capital Inflows (net) 5/ 171 427 -395 -98 -671 -671 -282 -302 157 100 100 100 100

IMF SDR allocation 0 0 0 2,765 0 0 0 0 0 0 0 0 0

Remaining Financing Needs (C=A-B) 4,449 -1,459 -4,620 8,528 6,537 6,530 -1,618 -1,565 -4,335 -3,571 -2,185 -1,097 -1,774

Borrowing from IMF (D) 0 2,834 500 1,053 1,166 1,166 3,006 3,009 0 0 0 0 0

Reserve Assets (decrease = +) (E=C-D) 4,449 -4,293 -5,120 7,475 5,371 5,364 -4,624 -4,574 -4,335 -3,571 -2,185 -1,097 -1,774

Memorandum items:

Gross official reserves (stock, in US$ billions) 7.3 12.2 17.3 9.8 4.5 4.5 9.1 9.0 13.4 16.9 19.1 20.2 22.0

(In months of prospective imports) 1.7 2.3 2.5 2.0 0.8 0.8 1.5 1.5 2.1 2.5 2.7 2.7 2.7

(In percent of IMF ARA metric: assuming fixed ER) 32.3 34.8 45.5 26.4 12.9 12.8 26.6 26.4 36.5 44.1 47.5 47.2 50.4

(In percent of IMF ARA metric: assuming flexible ER) 34.5 54.2 72.6 41.3 19.6 19.5 41.4 40.9 56.4 68.4 73.8 72.5 78.1

Net FX derivative position (in US$ billions) 8.1 5.8 4.9 4.0 4.5 4.5 4.0 4.0 4.0 4.0 4.0 4.0 4.0

Sources: State Bank of Pakistan, and Fund staff estimates and projections.

1/ Includes banks and non-bank private sector.

2/ Includes privatization receipts.

3/ Includes equity and debt portfolio inflows, and borrowing by banks and other sectors.

4/ Includes syndicated loans and Euro bonds.

5/ Includes capital account, financial derivatives, errors and omissions.

Table 4a. Pakistan: General Government Budget (PRs bn), 2018/192028/29

(In billions of Pakistani rupees)

2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29

Prog. Est. Prog. Proj. Proj.

Revenue and grants 4,934 6,306 6,933 8,076 9,621 9,621 13,366 13,362 15,485 17,418 19,445 21,741 24,345

Revenue 4,901 6,273 6,903 8,035 9,586 9,586 13,317 13,313 15,424 17,374 19,400 21,694 24,296

Tax revenue 4,473 4,748 5,755 6,943 8,396 8,396 11,298 11,302 13,320 15,006 16,755 18,737 20,989

Federal 4,072 4,334 5,247 6,331 7,752 7,752 10,430 10,435 12,306 13,865 15,479 17,311 19,394

FBR revenue 3,829 3,998 4,764 6,142 7,133 7,133 9,415 9,415 11,113 12,522 13,979 15,633 17,518

Direct taxes 1,446 1,524 1,732 2,280 3,250 3,250 4,216 4,597 5,291 5,945 6,642 7,466 8,390

Federal excise duty 234 250 277 321 367 367 571 561 672 756 850 950 1,063

Sales tax/VAT 1,465 1,597 1,990 2,532 2,581 2,581 3,425 3,166 3,855 4,359 4,855 5,407 6,034

Customs duties 685 626 765 1,009 935 935 1,204 1,091 1,296 1,461 1,632 1,809 2,032

Petroleum surcharge 206 294 424 128 580 580 918 923 1,080 1,215 1,358 1,518 1,698

Gas surcharge and other 14 33 39 42 28 28 66 67 78 88 99 110 123

GIDC 21 9 19 19 11 11 30 30 35 39 44 49 55

Provincial 402 414 508 612 644 644 868 867 1,014 1,142 1,275 1,426 1,595

Nontax revenue 427 1,524 1,147 1,092 1,190 1,190 2,019 2,011 2,103 2,368 2,645 2,958 3,307

Federal 341 1,422 997 964 1,025 1,025 1,811 1,804 1,861 2,095 2,340 2,616 2,926

Provincial 86 102 150 128 165 165 208 207 243 273 305 341 382

Grants 33 33 31 41 35 35 49 49 61 44 46 47 49

Expenditure (including statistical discrepancy) 8,345 9,649 10,306 13,301 16,110 16,137 21,518 21,283 24,710 25,619 27,582 29,996 33,430

Current expenditure 7,274 8,597 9,111 11,535 14,553 14,474 19,146 19,130 22,037 22,610 24,221 26,247 29,238

Federal 4,946 6,081 6,292 8,369 10,785 10,676 14,555 14,414 16,712 16,617 17,525 18,760 20,865

Interest 2,091 2,620 2,750 3,197 5,832 5,722 8,602 8,371 9,787 8,822 8,817 9,024 9,976

Domestic 1,821 2,313 2,524 2,829 5,046 4,936 7,489 7,254 8,517 7,436 7,354 7,483 8,331

Foreign 270 302 226 354 714 714 996 1,003 1,158 1,287 1,463 1,541 1,645

IMF budget support 0 5 0 14 72 72 116 115 112 99 0 0 0

Other 2,855 3,466 3,542 5,186 5,025 5,026 6,069 6,158 7,037 7,893 8,708 9,737 10,889

Defense 1,147 1,213 1,316 1,412 1,573 1,586 1,804 1,839 2,152 2,422 2,706 3,025 3,383

Other 1,708 2,253 2,226 3,774 3,452 3,441 4,265 4,319 4,886 5,472 6,002 6,711 7,505

Of which : subsidies 195 360 425 1,530 1,104 1,080 1,396 1,396 1,509 1,698 1,897 2,121 2,372

Of which : grants 612 917 855 1,142 981 988 1,312 1,272 1,488 1,675 1,871 2,092 2,340

Provincial 2,328 2,516 2,819 3,167 3,769 3,798 4,591 4,716 5,325 5,994 6,696 7,487 8,373

Development expenditure and net lending 1,049 1,139 1,288 1,649 1,938 1,953 2,179 2,135 2,673 3,009 3,361 3,749 4,192

Public Sector Development Program 1,008 1,090 1,211 1,609 1,879 1,893 2,108 2,064 2,590 2,916 3,257 3,632 4,062

Federal 502 468 441 397 648 652 782 782 890 1,002 1,119 1,242 1,388

Provincial 506 622 770 1,212 1,230 1,241 1,325 1,282 1,700 1,914 2,138 2,390 2,673

Net lending 41 49 77 40 60 60 71 71 83 93 104 117 130

Statistical discrepancy (“+” = additional expenditure) 22 -87 -93 116 -381 -290 194 19 0 0 0 0 0

Overall Balance (excluding grants) -3,445 -3,376 -3,404 -5,266 -6,524 -6,550 -8,201 -7,970 -9,286 -8,245 -8,183 -8,302 -9,133

Overall Balance (including grants) -3,412 -3,343 -3,373 -5,224 -6,490 -6,516 -8,152 -7,921 -9,225 -8,201 -8,137 -8,254 -9,084

Financing 3,412 3,343 3,373 5,224 6,490 6,516 8,152 7,921 9,225 8,201 8,137 8,254 9,084

External 417 896 1,418 677 -1,133 -1,132 1,256 489 1,590 1,446 1,087 210 465

Of which: privatization receipts 0 0 0 0 0 0 0 0 0 0 0 0 0

Of which: IMF 0 390 80 187 191 191 -197 -197 -296 -106 -203 -248 -258

Domestic 2,995 2,447 1,955 4,548 7,622 7,648 6,896 7,432 7,635 6,755 7,050 8,045 8,619

Bank 2,230 1,907 1,746 3,183 5,335 5,354 4,827 5,203 5,345 4,760 4,996 5,706 6,111

Nonbank 765 540 209 1,364 2,287 2,294 2,069 2,230 2,291 1,995 2,054 2,339 2,508

Memorandum items:

Underlying fiscal balance (excl. grants) 1/ -3,445 -3,376 -3,051 -4,737 -6,344 -6,370 -8,201 -7,970 -9,286 -8,245 -8,183 -8,302 -9,133

Primary balance (excluding grants) -1,353 -756 -654 -2,069 -692 -828 401 401 501 576 634 722 843

Underlying primary balance (excluding grants) 1/ -1,353 -756 -301 -1,540 -512 -648 401 401 501 576 634 722 843

Primary balance (including grants) -1,320 -723 -623 -2,028 -658 -794 450 450 562 620 680 769 892

Total primary spending 6,254 7,029 7,557 10,104 10,279 10,415 12,916 12,912 14,923 16,798 18,765 20,972 23,453

Total security spending 1,147 1,213 1,316 1,412 1,573 1,586 1,804 1,839 2,152 2,422 2,706 3,025 3,383

General government debt incl. IMF obligations 33,946 37,823 41,044 50,766 64,828 64,828 77,636 76,913 87,346 96,663 105,547 114,553 124,579

Domestic debt 20,732 23,283 26,265 31,085 38,810 38,810 45,706 46,242 53,878 60,528 67,374 75,172 83,533

External debt 13,214 14,540 14,779 19,680 26,018 26,018 31,930 30,671 33,468 36,136 38,173 39,381 41,046

General government and government guaranteed debt (incl. IMF) 35,915 40,167 43,451 53,749 68,342 68,343 81,896 81,074 91,876 101,379 110,454 119,711 130,020

Net general government debt (incl. IMF) 30,759 34,659 36,847 46,568 60,630 60,630 73,438 72,716 83,148 92,466 101,350 110,356 120,382

Nominal GDP (market prices) 43,798 47,540 55,836 66,640 84,069 84,069 106,577 106,679 124,813 140,491 156,951 175,490 196,253

Sources: Pakistani authorities; and IMF staff estimates and projections.

1/ Excludes one-off transactions, including asset sales. In FY 2021 it excludes PHPL debt clearance, IPPs related arrears clearance, and COVID-19 spending; in FY 2022 it excludes IPPs related arrears clearance and COVID-19 spending.

Table 4b. Pakistan: General Government Budget (percent of GDP), 2018/192028/29

(In percent of GDP, unless otherwise indicated)

2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29

Prog. Est. Prog. Proj. Proj.

Revenue and grants 11.3 13.3 12.4 12.1 11.4 11.4 12.5 12.5 12.4 12.4 12.4 12.4 12.4

Revenue 11.2 13.2 12.4 12.1 11.4 11.4 12.5 12.5 12.4 12.4 12.4 12.4 12.4

Tax revenue 10.2 10.0 10.3 10.4 10.0 10.0 10.6 10.6 10.7 10.7 10.7 10.7 10.7

Federal 9.3 9.1 9.4 9.5 9.2 9.2 9.8 9.8 9.9 9.9 9.9 9.9 9.9

FBR revenue 8.7 8.4 8.5 9.2 8.5 8.5 8.8 8.8 8.9 8.9 8.9 8.9 8.9

Direct taxes 3.3 3.2 3.1 3.4 3.9 3.9 4.0 4.3 4.2 4.2 4.2 4.3 4.3

Federal excise duty 0.5 0.5 0.5 0.5 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5

Sales tax 3.3 3.4 3.6 3.8 3.1 3.1 3.2 3.0 3.1 3.1 3.1 3.1 3.1

Customs duties 1.6 1.3 1.4 1.5 1.1 1.1 1.1 1.0 1.0 1.0 1.0 1.0 1.0

Petroleum surcharge 0.5 0.6 0.8 0.2 0.7 0.7 0.9 0.9 0.9 0.9 0.9 0.9 0.9

Gas surcharge and other 0.0 0.1 0.1 0.1 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1

GIDC 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Provincial 0.9 0.9 0.9 0.9 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8

Nontax revenue 1.0 3.2 2.1 1.6 1.4 1.4 1.9 1.9 1.7 1.7 1.7 1.7 1.7

Federal 0.8 3.0 1.8 1.4 1.2 1.2 1.7 1.7 1.5 1.5 1.5 1.5 1.5

Provincial 0.2 0.2 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2

Grants 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Expenditure (including statistical discrepancy) 19.1 20.3 18.5 20.0 19.2 19.2 20.2 20.0 19.8 18.2 17.6 17.1 17.0

Current expenditure 16.6 18.1 16.3 17.3 17.3 17.2 18.0 17.9 17.7 16.1 15.4 15.0 14.9

Federal 11.3 12.8 11.3 12.6 12.8 12.7 13.7 13.5 13.4 11.8 11.2 10.7 10.6

Interest 4.8 5.5 4.9 4.8 6.9 6.8 8.1 7.8 7.8 6.3 5.6 5.1 5.1

Domestic 4.2 4.9 4.5 4.2 6.0 5.9 7.0 6.8 6.8 5.3 4.7 4.3 4.2

Foreign 0.6 0.6 0.4 0.5 0.8 0.8 0.9 0.9 0.9 0.9 0.9 0.9 0.8

IMF budget support 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0

Other 6.5 7.3 6.3 7.8 6.0 6.0 5.7 5.8 5.6 5.6 5.5 5.5 5.5

Defense 2.6 2.6 2.4 2.1 1.9 1.9 1.7 1.7 1.7 1.7 1.7 1.7 1.7

Other 3.9 4.7 4.0 5.7 4.1 4.1 4.0 4.0 3.9 3.9 3.8 3.8 3.8

Of which : subsidies 0.4 0.8 0.8 2.3 1.3 1.3 1.3 1.3 1.2 1.2 1.2 1.2 1.2

Of which : grants 1.4 1.9 1.5 1.7 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2

Provincial 5.3 5.3 5.0 4.8 4.5 4.5 4.3 4.4 4.3 4.3 4.3 4.3 4.3

Development expenditure and net lending 2.4 2.4 2.3 2.5 2.3 2.3 2.0 2.0 2.1 2.1 2.1 2.1 2.1

Public Sector Development Program 2.3 2.3 2.2 2.4 2.2 2.3 2.0 1.9 2.1 2.1 2.1 2.1 2.1

Federal 1.1 1.0 0.8 0.6 0.8 0.8 0.7 0.7 0.7 0.7 0.7 0.7 0.7

Provincial 1.2 1.3 1.4 1.8 1.5 1.5 1.2 1.2 1.4 1.4 1.4 1.4 1.4

Net lending 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Statistical discrepancy (“+” = additional expenditure) 0.1 -0.2 -0.2 0.2 -0.5 -0.3 0.2 0.0 0.0 0.0 0.0 0.0 0.0

Overall Balance (excluding grants) -7.9 -7.1 -6.1 -7.9 -7.8 -7.8 -7.7 -7.5 -7.4 -5.9 -5.2 -4.7 -4.7

Overall Balance (including grants) -7.8 -7.0 -6.0 -7.8 -7.7 -7.8 -7.6 -7.4 -7.4 -5.8 -5.2 -4.7 -4.6

Financing 7.8 7.0 6.0 7.8 7.7 7.8 7.6 7.4 7.4 5.8 5.2 4.7 4.6

External 1.0 1.9 2.5 1.0 -1.3 -1.3 1.2 0.5 1.3 1.0 0.7 0.1 0.2

Of which: privatization receipts 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Of which: IMF 0.0 0.8 0.1 0.3 0.2 0.2 -0.2 -0.2 -0.2 -0.1 -0.1 -0.1 -0.1

Domestic 6.8 5.1 3.5 6.8 9.1 9.1 6.5 7.0 6.1 4.8 4.5 4.6 4.4

Bank 5.1 4.0 3.1 4.8 6.3 6.4 4.5 4.9 4.3 3.4 3.2 3.3 3.1

Nonbank 1.7 1.1 0.4 2.0 2.7 2.7 1.9 2.1 1.8 1.4 1.3 1.3 1.3

Memorandum items:

Underlying fiscal balance (excl. grants) 1/ -7.9 -7.1 -5.5 -7.1 -7.5 -7.6 -7.7 -7.5 -7.4 -5.9 -5.2 -4.7 -4.7

Primary balance (excluding grants) -3.1 -1.6 -1.2 -3.1 -0.8 -1.0 0.4 0.4 0.4 0.4 0.4 0.4 0.4

Underlying primary balance (excluding grants) 1/ -3.1 -1.6 -0.5 -2.3 -0.6 -0.8 0.4 0.4 0.4 0.4 0.4 0.4 0.4

Primary balance (including grants) -3.0 -1.5 -1.1 -3.0 -0.8 -0.9 0.4 0.4 0.5 0.4 0.4 0.4 0.5

Total primary spending 14.3 14.8 13.5 15.2 12.2 12.4 12.1 12.1 12.0 12.0 12.0 12.0 12.0

Total security spending 2.6 2.6 2.4 2.1 1.9 1.9 1.7 1.7 1.7 1.7 1.7 1.7 1.7

General government debt incl. IMF obligations 77.5 79.6 73.5 76.2 77.1 77.1 72.8 72.1 70.0 68.8 67.2 65.3 63.5

Domestic debt 47.3 49.0 47.0 46.6 46.2 46.2 42.9 43.3 43.2 43.1 42.9 42.8 42.6

External debt 30.2 30.6 26.5 29.5 30.9 30.9 30.0 28.8 26.8 25.7 24.3 22.4 20.9

General government and government guaranteed debt (incl. IMF) 82.0 84.5 77.8 80.7 81.3 81.3 76.8 76.0 73.6 72.2 70.4 68.2 66.3

Net general government debt (incl. IMF) 70.2 72.9 66.0 69.9 72.1 72.1 68.9 68.2 66.6 65.8 64.6 62.9 61.3

Nominal GDP (market prices, billions of Pakistani rupees) 43,798 47,540 55,836 66,640 84,069 84,069 106,577 106,679 124,813 140,491 156,951 175,490 196,253

Sources: Pakistani authorities; and IMF staff estimates and projections.

Table 5. Pakistan: Monetary Survey, 2018/192023/24

2018/19 2019/20 2020/21 2021/22 2022/23 2023/24

Q1 Q2 Q3 Q4

Prog. Est. Est. Est. Proj. Prog. Proj.

(Billions of Pakistani rupees, unless otherwise indicated)

Monetary survey

Net foreign assets (NFA) -1,507 -516 725 -753 -2,688 -2,688 -2,436 -2,126 -2,195 -2,328 -2,314

Net domestic assets (NDA) 19,306 21,424 23,573 28,356 34,211 34,211 33,961 35,062 35,043 37,318 38,092

Net claims on government, of which: 12,337 14,547 16,265 19,623 23,351 23,351 24,566 25,213 26,851 28,963 29,053

Budget support, of which: 11,546 13,471 15,248 18,331 21,863 21,863 22,938 23,930 25,751 27,463 27,553

Banks 4,857 7,016 9,974 13,294 16,923 16,923 18,558 20,713 22,534 23,083 24,336

Commodity operations 756 813 904 1,134 1,486 1,486 1,309 1,257 1,100 1,500 1,500

Credit to nongovernment 8,073 8,372 9,114 10,413 10,916 10,916 10,732 11,322 11,112 11,491 11,331

Private sector 1/ 6,703 6,906 7,702 9,044 9,253 9,253 9,058 9,637 9,393 9,715 9,577

Public sector enterprises 1,370 1,466 1,413 1,369 1,663 1,663 1,674 1,686 1,719 1,776 1,754

Privatization account -41 -41 -41 -41 -41 -41 -41 -41 -41 -41 -41

Other items, net -1,063 -1,455 -1,766 -1,640 -16 -16 -1,296 -1,433 -2,880 -3,096 -2,251

Broad money 17,798 20,908 24,298 27,603 31,523 31,523 31,525 32,936 32,848 34,990 35,779

Currency outside scheduled banks 4,950 6,142 6,910 7,572 9,149 9,149 8,288 8,452 8,350 9,649 9,095

Rupee deposits 11,739 13,691 16,342 18,817 20,847 20,847 21,698 22,990 22,892 23,603 24,988

Foreign currency deposits 1,110 1,075 1,046 1,213 1,527 1,527 1,539 1,494 1,606 1,737 1,696

State Bank of Pakistan (SBP)

NFA -1,127 -181 931 -560 -2,013 -2,013 -1,642 -1,422 -1,491 -1,534 -1,610

NDA 7,701 7,861 7,733 9,886 13,433 13,433 12,101 12,095 12,959 14,210 14,286

Net claims on government 6,676 6,524 5,320 5,124 5,233 5,233 4,954 3,490 3,490 4,954 3,490

Of which: budget support 6,689 6,455 5,274 5,037 4,940 4,940 4,380 3,217 3,217 4,380 3,217

Claims on nongovernment 12 19 49 61 62 62 61 60 60 61 60

Claims on scheduled banks 683 877 1,265 1,603 1,542 1,542 1,491 1,538 1,538 1,491 1,538

Privatization account -41 -41 -41 -41 -41 -41 -41 -41 -41 -41 -41

Other items, net 371 482 1,140 3,139 6,637 6,637 5,635 7,047 7,911 7,744 9,238

Reserve money, of which: 6,573 7,680 8,663 9,327 11,420 11,420 10,459 10,672 11,468 12,676 12,676

Banks’ reserves 1,246 1,171 1,307 1,229 1,634 1,634 1,613 1,619 1,740 1,954 1,923

Currency 5,294 6,468 7,288 8,002 9,674 9,674 8,742 8,934 9,728 10,721 10,753

(Annual percentage change, unless otherwise indicated)

Broad money 11.3 17.5 16.2 13.6 14.2 14.2 12.9 17.9 14.0 11.0 13.5

NFA, banking system (in percent of broad money) 2/ -8.1 5.6 5.9 -6.1 -7.0 -7.0 -4.0 -0.8 2.2 1.1 1.2

NDA, banking system (in percent of broad money) 2/ 19.4 11.9 10.3 19.7 21.2 21.2 16.9 18.7 11.8 9.9 12.3

Budgetary support (in percent of broad money) 2/ 14.1 10.8 8.5 12.7 12.8 12.8 15.4 18.6 18.9 17.8 18.1

Budgetary support 24.4 16.7 13.2 20.2 19.3 19.3 23.1 27.8 26.8 25.6 26.0

Private credit 1/ 11.9 3.0 11.5 17.4 2.3 2.3 -1.0 0.1 0.5 5.0 3.5

Currency 12.8 24.1 12.5 9.6 20.8 20.8 8.3 9.9 0.9 5.5 -0.6

Reserve money 19.9 16.8 12.8 7.7 22.4 22.4 12.5 14.7 13.0 11.0 11.0

Memorandum items:

Velocity 2.6 2.5 2.5 2.6 2.9 2.9 3.0 3.1 3.1 3.3 3.2

Money multiplier 2.7 2.7 2.8 3.0 2.8 2.8 3.0 3.1 2.9 2.8 2.8

Currency to broad money ratio (percent) 27.8 29.4 28.4 27.4 29.0 29.0 26.3 25.7 25.4 27.6 25.4

Currency to deposit ratio (percent) 38.5 41.6 39.7 37.8 40.9 40.9 35.7 34.5 34.1 38.1 34.1

Foreign currency to deposit ratio (percent) 8.6 7.3 6.0 6.1 6.8 6.8 6.6 6.1 6.6 6.9 6.4

Reserves to deposit ratio (percent) 9.7 7.9 7.5 6.1 7.3 7.3 6.9 6.6 7.1 7.7 7.2

Budget bank financing (change from the beginning of the fiscal year; in

PRs billions), of which: 2,262 1,925 1,777 3,083 3,532 3,532 1,075 2,067 3,888 5,600 5,690

By commercial banks -887 2,159 2,958 3,320 3,629 3,629 1,635 3,790 5,611 6,161 7,413

By SBP 3/ 3,150 -234 -1,181 -237 -97 -97 -561 -1,723 -1,723 -561 -1,723

NFA of SBP (change from beginning of the year; in billions of U.S. dollars) 4/ -9.4 8.1 6.7 -9.1 -6.3 -6.3 2.6 3.5 4.6 4.5 4.2

NFA of commercial banks (millions of U.S. dollars) -3,127 -2,092 -1,225 -1,227 -3,292 -3,292 -3,475 -3,108 -2,480 -2,776 -2,461

NDA of commercial banks (billions of Pakistani rupees) 11,605 13,563 15,840 18,469 20,778 20,778 21,860 22,967 22,084 23,108 23,807

Sources: Pakistani authorities; and IMF staff estimates and projections.

1/ Items pertaining to Islamic Financing previously reported under “Other assets” have been reclassified as “Credit to private sector” beginning March 2016.

2/ Denominator is the stock of broad (reserve) money at the end of the previous year.

3/ Includes use of government deposits.

4/ Includes valuation adjustments.

Table 6. Pakistan: Financial Indicators for the Banking System, 201323

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec.

Capital adequacy

Regulatory capital to risk-weighted assets 1/ 14.9 17.1 17.3 16.2 15.8 16.2 17.0 18.6 16.7 17.0 19.7

Tier I capital to risk-weighted assets 12.6 14.3 14.4 13.0 12.9 13.2 14.0 14.8 13.5 14.2 16.0

Capital to total assets 9.0 10.0 8.4 7.8 7.1 7.1 7.2 7.2 6.3 5.9 5.9

Asset composition and quality

Nonperforming loans (NPLs) to gross loans 13.3 12.3 11.4 10.1 8.4 8.0 8.6 9.2 7.9 7.3 7.6

Provisions to NPLs 78.4 79.8 84.9 85.0 87.2 83.8 81.4 88.3 91.2 89.5 92.7

Net NPLs to total eligible capital 14.7 10.1 7.7 7.3 5.8 7.8 8.9 5.3 4.0 4.6 2.7

Earnings and profitability

Return on assets (after tax) 1.1 1.5 1.5 1.3 0.9 0.8 0.8 1.0 1.0 1.0 1.7

Return on equity (after tax) 12.4 16.1 15.6 14.4 11.5 10.7 11.3 13.8 14.1 16.9 27.1

Net interest income to gross income 70.4 71.3 70.4 71.2 72.7 75.4 79.3 79.7 77.9 79.8 82.9

Noninterest expenses to gross income 57.2 53.3 47.8 53.1 57.1 60.2 57.6 50.0 53.5 48.4 41.2

Liquidity

Liquid assets to total assets 48.6 49.2 53.8 53.7 54.0 48.7 49.7 54.8 55.4 56.6 63.5

Liquid assets to total deposits 61.3 64.5 73.3 72.1 76.1 67.2 68.4 74.3 76.7 86.4 101.1

Loans/Deposits 49.5 48.2 46.4 46.6 50.1 55.8 51.7 44.8 46.6 50.4 41.8

Table 7. Pakistan: Indicators of Fund Credit, 201529

(In millions of SDR, unless otherwise indicated)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Projections 1/

Projected level of credit outstanding based on existing and prospective drawings

Total 3,600.0 4,393.0 4,393.0 4,243.0 4,867.0 5,192.5 4,810.3 5,722.2 5,660.1 5,752.2 4,983.0 4,504.3 3,145.9 1,626.3 847.0

Of which:

ECF, SBA, and ENDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 894.0 2,250.0 2,250.0 2,138.3 1,286.2 273.0 0.0

Extended Fund Facility and Rapid Financing Instrument 3,600.0 4,393.0 4,393.0 4,243.0 4,867.0 5,192.5 4,810.3 5,722.2 4,766.1 3,502.2 2,733.0 2,366.0 1,859.7 1,353.3 847.0

In percent of quota 348.3 216.3 216.3 208.9 239.6 255.7 236.8 281.7 278.7 283.2 245.3 221.8 154.9 80.1 41.7

In percent of end-period gross official reserves 31.4 32.4 44.1 81.6 59.2 55.7 38.0 136.4 91.8 79.6 42.5 32.9 22.3 10.4 4.9

As a share of external debt 7.3 7.7 6.9 5.8 6.0 6.4 5.5 6.4 6.2 6.1 5.0 4.3 2.9 1.5 0.8

Projected debt service to the Fund based on existing and prospective drawings

Total 338.1 51.4 77.5 248.0 532.7 799.3 833.4 901.5 1,382.1 1,759.6 1,206.3 868.1 1,682.3 1,756.1 951.7

Of which:

Principal 303.0 0.0 0.0 150.0 420.0 690.0 732.2 732.2 956.0 1,263.9 769.2 478.8 1,358.3 1,519.6 779.3

Interest and charges 35.1 51.4 77.5 98.0 112.7 109.3 101.2 169.3 426.1 495.7 437.1 389.3 324.0 236.5 172.4

SBA and ENDA principal 303.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 111.7 852.0 1013.3 273.0

Extended Fund Facility principal 0.0 0.0 0.0 150.0 420.0 690.0 732.2 732.2 702.2 756.2 515.3 367.0 506.3 506.3 506.3

Rapid Financing Instrument principal 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 253.9 507.8 253.9 0.0 0.0 0.0 0.0

In percent of quota 32.7 2.5 3.8 12.2 26.2 39.4 41.0 44.4 68.1 86.6 59.4 42.7 82.8 86.5 46.9

In percent of end-period gross official reserves 2.9 0.4 0.8 4.8 6.5 8.6 6.6 21.5 22.4 24.4 10.3 6.3 11.9 11.2 5.5

As a share of total external debt service 7.2 1.1 1.1 3.6 5.3 8.9 9.9 6.4 10.7 14.6 9.4 6.3 10.6 10.7 11.7

Memorandum items:

Quota (millions of SDRs) 1,034 2,031 2,031 2,031 2,031 2,031 2,031 2,031 2,031 2,031 2,031 2,031 2,031 2,031 2,031

Gross official reserves (millions of U.S. dollars) 15,886 18,269 14,107 7,199 11,334 13,412 17,686 5,575 8,220 9,636 15,633 18,279 18,813 20,884 23,159

Net International reserves (millions of U.S. dollars) -10,842 -8,528 -3,210 -16,893 -12,425 -11,160 -4,137 -853 1,493 5,592 8,906

Exports of goods and services (millions of US dollars) 6,630 6,875 7,689 7,521 7,732 8,054 9,887 8,990 10,239 10,097 10,689 11,405 12,094 12,854 14,883

Total External Debt (millions of U.S. dollars) 68,473 76,436 90,464 100,681 110,957 117,115 121,690 119,485 121,617 125,099 134,172 140,044 143,670 147,972 150,068

Total external debt (percent of CY GDP) 22.3 23.4 26.0 29.7 35.7 36.1 33.7 33.5 34.7 33.4 33.4 32.6 29.1 29.0 59.0

Total external debt service (millions of U.S. dollars) 6,468 6,217 9,664 9,498 13,807 12,940 11,775 18,796 17,239 16,026 17,156 18,365 21,144 21,813 10,881

Table 8. Pakistan: Schedule of Reviews and Purchases

Availability Date Amount of Purchase Conditions

Millions of SDRs Percent of Quota

July 12, 2023 894 44.0 Approval of arrangement

December 1, 2023 528 26.0 First review and end-September 2023 performance/ continuous criteria

March 15, 2024 828 40.8 Second review and end-December 2023 performance/ continuous criteria

Total 2,250 110.8

Table 9. Pakistan: Decomposition of Public Debt and Debt Service by Creditor 2022/232024/25 1/

Debt Stock (end of period) Debt Service

Dec-23 2022/23 2023/24 2024/25 2022/23 2023/24 2024/25

(In US$ million) (Percent total debt) (Percent GDP) (In US$ million) (Percent GDP)

Total 253,843 100.0 75.0 84,147 87,410 54,199 24.9 24.1 14.2

External 102,748 40.5 30.4 18,699 13,309 11,872 5.5 3.7 3.1

Multilateral creditors 46,509 18.3 13.7 5,210 5,581 5,289 1.5 1.5 1.4

IMF 7,596 3.0 2.2

World Bank 20,121 7.9 5.9

ADB/AfDB/IADB 15,367 6.1 4.5

Other Multilaterals 3,425 1.3 1.0

o/w: IsDB 99 0.0 0.0

AIIB 1,698 0.7 0.5

Bilateral Creditors 41,689 16.4 12.3 4,282 4,054 2,923 1.3 1.1 0.8

Paris Club 7,541 3.0 2.2 1,317 1,416 1,056 0.4 0.4 0.3

o/w: Japan 3,609 1.4 1.1

France 1,246 0.5 0.4

Non-Paris Club* 34,148 13.5 10.1 2,965 2,637 1,867 0.9 0.7 0.5

o/w: China ** 23,651 9.3 7.0

Saudi Arabia** 6,661 2.6 2.0

Bonds*** 7,804 3.1 2.3 1,611 1,584 501 0.5 0.4 0.1

Commercial creditors 6,094 2.4 1.8 6,433 1,605 2,996 1.9 0.4 0.8

o/w: Chinese commercial banks 5,395 2.1 1.6

Other 699 0.3 0.2

Other international creditors 652 0.3 0.2 1,164 486 163 0.3 0.1 0.0

o/w: NPC/NBP/BOC deposits/PBC**** 652 0.3 0.2

Domestic 151,096 59.5 44.7 65,448 74,101 42,327 19.3 20.5 11.1

T-Bills 29,695 11.7 8.8 31,631 36,097 3,852 9.4 10.0 1.0

Held by: central bank 271 0.1 0.1

local banks 20,078 7.9 5.9

local non-banks 9,346 3.7 2.8

Bonds***** 106,539 42.0 31.5 22,776 30,045 34,069 6.7 8.3 8.9

Held by: central bank 19,429 7.7 5.7

local banks 66,138 26.1 19.5

local non-banks 20,971 8.3 6.2

Loans/Other 14,862 5.9 4.4 11,040 7,959 4,406 3.3 2.2 1.2

Held by: central bank****** 1,685 0.7 0.5

local banks******* 2,091 0.8 0.6

National Savings Scheme 11,086 4.4 3.3

Memo items:

Collateralized debt 0.0 0.0

o/w: Related

o/w: Unrelated

Contingent liabilities

o/w: Public guarantees 12,401 4.9 3.5

o/w: Other explicit contingent liabilities n.a. n.a. n.a.

Central bank deposit liabilities 3,700 1.5 1.1

Central bank bilateral swap liabilities 4,271 1.7 1.2

Nominal GDP 350,160

Annex I. Progress Under the SBA and Challenges Ahead

1. The objectives of Pakistan’s 2023-24 Stand-By Arrangement (SBA) were largely achieved. The SBA began at a difficult juncture: Pakistan was recovering from devastating floods; faced acute external financing pressures; and was adversely affected by misaligned domestic policies. Reflecting significant policy effort by the authorities, the SBA succeeded in stabilizing the economy, rebuilding buffers, and making some progress on the structural reform agenda.

2. Projected outcomes are broadly in line with initial program projections. Projected FY24 growth was revised down from 2.5 to 2.0 percent at the time of the first review, reflecting weaker- than-expected domestic demand. The FY24 current account is now expected to be stronger, reflecting outturns over the course of FY24, though this was offset by lower than anticipated financing inflows. Market sentiment has improved significantly since the start of the program, with EMBIG spreads down over 1,300 bps, although risks to debt sustainability remain large. The medium term growth outlook is broadly the same, although external balances are expected to be stronger than at the time of the SBA request. Reserve buildup is also expected to be larger.

Pakistan: Selected Economic Indicators, SBA Request v. Current, FYs 2328 1/

2022/23 2023/24 2024/25 2025/26 2026/27 2027/28

Actual SBA Req Current SBA Req Current SBA Req Current SBA Req Current SBA Req Current

Real GDP growth (%) -0.2 2.5 2.0 3.6 3.5 4.5 4.5 5.0 5.0 5.0 5.0

Consumer prices (period average, % change) 29.2 25.9 24.8 11.4 12.7 7.4 7.6 6.5 6.5 6.5 6.5

Underlying primary balance (excluding grants) 2/ -0.8 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4

Gen. gov. debt (incl. IMF obligations, % of GDP) 77.1 74.9 72.1 72.1 69.9 70.6 68.8 68.2 67.2 66.1 65.2

Current account balance (% of GDP) -0.7 -1.8 -0.8 -1.7 -1.2 -1.7 -1.2 -1.7 -1.3 -1.7 -1.4

Gross official reserves (billions of US$) 4.5 9.0 9.0 12.9 13.4 14.1 17.0 15.3 19.1 15.7 20.2

in months of next year’s G&S imports 0.8 1.4 1.5 1.8 2.1 1.9 2.5 1.9 2.7 1.9 2.7

3. Macroeconomic resilience has improved as short-term vulnerabilities eased. The authorities are on track to fully implement the FY24 budget, representing a strong primary balance improvement during the program, including strong revenue performance. They also maintained an appropriately tight monetary policy that saw the start of disinflation (despite the implementation of necessary energy tariff increases to avoid CD accumulation); and amid easing external pressures FX market functioning has improved.

4. Good progress was made on the structural reform agenda. Benchmarks related to sound budget practices; social spending; the FX market; energy sector stability; SOE governance reform (work toward the missed end-November 2023 SB on amending four dedicated SOE laws remains in progress); climate resilience; and macroeconomic statistics were all achieved.

5. Significant challenges remain beyond the life of this program. Debt sustainability remains a large risk. Continued revenue-driven fiscal consolidation is critical. Inflation remains high despite the disinflation trajectory and the SBP must remain vigilant, ready to take prompt actions if needed. Likewise, a flexible exchange rate is key to moderating balance of payments pressures and rebuilding international reserves. Significant progress was made over a short period on the structural reform agenda (though the creation of the SWF and SIFC in August 2023 pose risks to the SOE reform and business environment agendas). However, much more is required in the areas noted above to achieve medium-term viability and address Pakistan’s broader structural challenges, including its narrow export base, low private investment and FDI, weak revenue base relative to public investment needs, low health and education spending levels in the context of major human capital development needs, elevated poverty levels, and income and gender inequality.

Annex II. External Sector Assessment

Overall Assessment: The external position of Pakistan in FY23 was broadly in line with the level implied by medium-term fundamentals and desirable policies. The current account (CA) deficit narrowed to 0.7 percent of GDP, compared to 4.7 percent in FY22. Nevertheless, without import payment restrictions, the CA deficit in FY23 would have been larger, requiring additional real exchange rate depreciation in order to bring the CA back to equilibrium.

Potential Policy Responses: The authorities should allow the exchange rate to act as a buffer for shocks and refrain from any restrictions on import payments, which could artificially compress the CA. There is also a need for fiscal tightening to alleviate real exchange rate appreciation pressures, as well as structural reforms to boost productivity and competitiveness.

Foreign Assets and Liabilities: Position and Trajectory

Background. Pakistan’s Net International Investment Position (NIIP) reached US$-131 billion in 2023, a similar level to 2022 but markedly lower than FY2019-2022, when NIIP averaged US$-116 billion. Net direct investment stood at US$-28.8 billion, whereas net portfolio investment reached US$-9.3 billion. Pakistan’s IIP does not feature substantial positions in financial derivatives.

Assessment. Gross debt-service obligations remain substantial, and current account imbalances stemming from insufficient exchange rate flexibility and import restrictions may require additional policy adjustment to reach external equilibrium.

2023 (% GDP)

NIIP: -38.7

Gross Assets: -6.6

Gross Liab.: – 45.3

Current Account

Background. The CA posted a small surplus in FY24Q2 of about US$200 million, driven by an increase in exports. Staff projects imports to increase over the remaining two quarters, with the CA balance for FY24 reaching approximately -0.8 percent of GDP, compared to -0.7 in FY23, -4.7 in FY22, and -0.8 in FY21.

Assessment. The cyclically adjusted CA in FY23 is estimated to have been -0.6 percent of GDP. While the EBA CA norm is estimated at -0.7 percent of GDP, staff judges the norm to be closer to -0.5 percent of GDP, consistent with the need to strengthen NIIP through building external assets and reducing external liabilities. As a result, staff judges the CA gap to be -0.1 (compared to 0.1 in the CA model).

The impact of import payment restrictions on the CA in FY23 is not captured by the EBA model; these distortions, when unwound, tend to move the CA gap towards a weaker external position and the REER gap towards further overvaluation.

Pakistan: Model Estimates for 2023 (in percent of GDP)

CA Model REER Model ES Model

CA-Actual -0.7

Cyclical Contributions (from model) -0.1

Additional temporary/statistical factors 0

Adjusted CA -0.6 -0.6

CA norm (from model) 1/ -0.7

Adjustments to the norm 2/ 0.2

Adjusted CA norm -0.5

CA gap -0.1 2.5

o/w Policy gap -1.6

Elasticity 0.16

REER gap 0.7 -7.2 -16.3

Real Exchange Rate

Background. Pakistan’s REER has depreciated over the past two years (5.8 percent in FY23 and 1.2 in FY22). In contrast, the REER appreciated 2 percent in FY21. The change in the 2023 REER reflects a trade-weighted nominal depreciation of about 26.5 percent, as well as foreign inflation of around 7.5 percent among Pakistan’s trading partners, and domestic inflation of 29 percent. This trend has reversed during the current fiscal year, however: by end-FY24Q2 the REER had appreciated about 10 percent compared to FY23 Q1, with the nominal exchange rate remaining broadly stable at around PRs 280 per US$ since July 2023.

Assessment. Staff’s assessment places the FY23 REER gap at 0.7 percent using the EBA CA model. Results do not take into account the influence of import payment restrictions, which, when removed, would likely require additional real depreciation. In light of these considerations, staff continues to see a need for greater exchange rate flexibility.

Capital and Financial Accounts: Flows and Policy Measures

Background. The financial account posted a deficit of US$2.5 billion in FY23, driven primarily by government debt repayments: general government amortizations exceeded disbursements by US$2.9 billion. These flows were partially offset by US$900 million in “Other investment assets” of the general government. Net portfolio investment totaled just over US$-1 billion, whereas net FDI reached US$600 million. In previous years, however, the financial account remained in positive territory, averaging US$9.1 billion over FY19-22, and driven primarily by disbursements to the general government (and to monetary authorities in the specific case of FY19). Pakistan’s international financial integration continues to be limited, with a normalized Chinn-Ito Index of 0.16 placing the country at the 25th percentile of the world sample in terms of capital mobility, a score that has remained unchanged over the past five years.

Assessment. Authorities have been proactive in their intent to phase out distortive measures, but there is still space for additional reforms.

FX Intervention and Reserves Level

Background. Gross reserves decreased sharply during FY23, totaling US$4.5 billion (about 1.3 percent of GDP, or 0.8 months of imports) in contrast to US$9.8 billion in FY22 and US$17.2 billion in FY21. More recently, reserves have gradually recovered, reaching US$8.2 billion in December 2023. In addition to spot FX interventions to accumulate reserves, the SBP has also gradually reduced its negative net forward position, from US$-4.5 billion in July 2023 to US$-3.4 billion by end-December 2023. During 2024, SBP’s forward position has remained broadly unchanged.

Assessment. Pakistan’s gross reserves in 2023 reached 18.2 percent of the IMF’s (capital controls-adjusted) ARA metric, well below the normative adequacy range of 100-150 percent of the ARA metric. In order for SBP’s ongoing reserve accumulation efforts to continue (gross reserves are projected to reach US$22 billion by end-FY29), it is imperative to avoid any actions to manage the current account, which could lead to excessive real appreciation.

Appendix I. Letter of Intent

Ms. Kristalina Georgieva Managing Director International Monetary Fund

700 19th Street, N.W. Washington, D.C. 20431

USA

Dear Ms. Georgieva:

1. The final review of the 9-month Stand-By Arrangement (SBA) approved in July 2023 finds Pakistan in a strengthened economic and financial position, with the economy recovering due to the policy efforts of the caretaker government and resumption of official inflows. While the situation has improved over the course of the SBA, the path forward remains challenging with very high risks, including due to elevated external and domestic financing needs as well as from geopolitical tensions through global commodity prices and financial conditions. Given this we recognize the ongoing need to implement sound policies geared toward resolving Pakistan’s macroeconomic and external imbalances and restoring sustainability.

2. Recovery from the FY23 recession has become increasingly evident in the months since the first review. Large-scale manufacturing rebounded in FY24H1, growing by 1.8 percent (yoy) in January 2024, as has agricultural output from flood-affected levels last year. However, both headline (20.7 percent yoy in March) and core inflation (12.8 and 20.0 percent yoy in urban and rural areas, respectively) remain very high, despite some recent moderation. On the external front, the current account posted a US$0.8 billion deficit in FY24H1, as increased exports and remittances helped

offset the ongoing unwinding of import compression. The resumption of official inflows has permitted the rebuilding of reserves to around US$8 billion, almost double that before approval of the SBA.

3. Our performance under the SBA has been strong. Thanks to continued consistent implementation of the FY24 budget, timely energy price adjustments, an appropriate monetary policy stance, and continued efforts to rebuild foreign reserves, all end-December 2023 quantitative performance criteria (QPCs) and all indicative targets (ITs) were met (Table 1). We have also met the Structural Benchmarks (SBs) on the notification of the semiannual gas tariff adjustment, on inflation adjustment of BISP, and on developing a plan to strengthen internal controls in the SBP’s lending

operations, in line with the recommendations of the 2023 Safeguards Assessment (Table 2). We have made progress on amending the Acts of four SOEs to make the new SOE law fully applicable to

those SOEs (missed end-November SB). Finally, the SBP issued instructions to eliminate (i) the multiple currency practice related to the exchange rate used for SBP-GoP FX transactions, effective January 31; and (ii) the exchange restriction from limitations on advance payments for imports,

effective January 30.

4. We reaffirm our commitment to the policies and objectives of the SBA, as detailed in the Memorandum of Economic and Financial Policies (MEFP) for the first review and recognize that the policy and reform effort started under the SBA must continue. We are preparing a home-grown medium-term policy agenda geared to addressing Pakistan’s vulnerabilities and moving from stabilization to recovery and transformation. With this in mind, we want to underline our commitment to pursue the following core goals beyond the SBA:

• We recognize the need to strengthen Pakistan’s fiscal sustainability, and continue fiscal consolidation. These are necessary to address Pakistan’s debt vulnerabilities, as well as reduce crowding out and support monetary policy in bringing inflation lower. To achieve this:

o We will take all necessary measures to deliver the FY24 general government primary balance (excluding grants) target of PRs 401 billion (0.4 percent of GDP). In this regard, we will reconfirm with each province their commitment to delivering the previously agreed fiscal surplus in support of this goal.

o We will continue fiscal consolidation in the FY25 budget, consulting closely with IMF staff throughout its preparation. Our aim for FY25 will be to reach a general government primary surplus of 1.0 percent of GDP. The consolidation will continue over the following years.

o To facilitate the sustainable medium-term adjustment, we will focus on mobilizing significant additional revenue through policy reforms to broaden the tax base, especially in undertaxed sectors; enhance revenue administration; and incentivize greater and more balanced fiscal efforts by the provinces. We have supported these efforts by issuing an SRO for implementing a new scheme to register and collect taxes from non-filing supply chain operators and retailers of goods and services in the tax net on March 30, 2024. Enforcing income tax returns and collecting the due minimum advance income tax will begin from July

1, 2024. This exercise will be launched first in four provincial capitals and Islamabad. Alongside, we will finalize the FBR reform plans, building on the proposal prepared by the caretaker government, in line with international best practice. Separately, we will pursue digitalization initiatives to enhance transparency, client experience and revenue collection. Furthermore, we will strengthen our budget process to bolster its credibility and transparency, as well as spending efficiency. In particular, given their role in undermining fiscal discipline, we commit not to make any future use of supplementary grants. Finally, we will (i) limit guarantees to no more than PRs 4,300 billion and 4,900 billion by end-June and end-December 2024, respectively; and (ii) not grant any further tax amnesties or new preferential tax treatments or exemptions in FY24 or FY25 including through Statutory Regulatory Orders without prior NA approval.

• Without addressing its energy sector viability, Pakistan’s ongoing sustainability will be at risk. We are committed to reaching the end-June goal of net zero CD accumulation and recognize that restoring energy sector viability will entail dramatically reducing the cost-side pressures of the energy sector while maintaining cost recovery tariffs. We are thus committed to continuing regular, timely, and automatic notifications of adjustments to natural gas and electricity tariffs in a manner that is consistent with full cost recovery and to reduce natural gas price disparities between regions and industries and within industries. We will also seek to find cost reductions and will accelerate structural reforms to address the sector’s fundamental issues, including reforming the governance of DISCOs; moving captive power demand to the electricity grid; finalizing a proposal on tube well subsidy reform by end-FY24; expanding renewable energy capacity in line with the IGCEP; improving electricity transmission and distribution efficiencies; and continuing to refine anti-theft efforts. In the post-SBA period, we remain committed: (i) to protect low-income consumers through the progressive tariff structure, for both electricity and gas and avoid any subsidized or preferential industrial tariffs; (ii) not to introduce any new fuel subsidy or cross-subsidy schemes in FY24 and beyond; (iii) to refrain from netting out cross-arrears without proper due diligence and ex ante independent auditing;

(v) not to use “non-cash” settlements (e.g., payables against the reimbursement of on-lent loans to DISCOs); and (vi) to avoid issuing additional government guarantees to entities in the sector except where a replacement guarantee is required on expiry of a previous guarantee. In FY25 we will seek to reduce or at least maintain the stock of CD through implementation of the above reforms.

• Monetary policy, supported by a flexible exchange rate, will be decisively geared towards returning inflation to target, and we will continue building reserves. While there has been a welcome recent decline in headline and core inflation, we recognize the importance of maintaining an appropriately tight monetary policy stance, and of remaining proactive in case of signs of increased pass-through from recent gas price increases or possible exchange rate pressures from FX market normalization. We are also committed to ensuring a flexible exchange rate, both to support external rebalancing and as a buffer for shocks, and intend to advance policies to promote a deeper FX market, which would help Pakistan attract private inflows on a sustained basis. Given that limited reserve buffers remain our main constraint to entrenching external stability, we will continue to rebuild foreign reserves, with FX sales limited to episodes of disorderly market conditions and not used to prevent a trend depreciation of the rupee driven by fundamentals.

• Supporting a rebalancing from state- to private-led activity, through the removal of distortionary protection, subsidies, and concessions and reforms to improve SOE performance. This will include further progress on SOE reform through privatization and restructuring, and seek to limit the role of the state, including in the setting of prices and through the provision of concessions/subsidies for economic activity. Where privatization is appropriate, as with PIA, we will ensure that these plans are transparent and minimize impacts on the public balance sheet. We will also further advance SOE governance reforms, including bringing the legal frameworks of all SOEs into line with the SOE Act in a phased manner, and further strengthening the operational capacity of the Central Monitoring Unit. In the case of SOEs under the umbrella of the Sovereign Wealth Fund, we will ensure their governance frameworks are at least on par with the principles required by the SOE Act. We remain committed to ensuring the Special Investment Facilitation Council (SIFC) does not (i) create an uneven playing field, (ii) promise (or propose the government provide) incentives of any sort or guaranteed returns, or (iii) distort the investment landscape. We will also establish a set of best transparency and accountability practices for SIFC operations, including to ensure that all investment made under SIFC result from the standard Public Investment Management framework.

• Building resilience and making growth inclusive. We will ensure that social protection is strengthened further, including through increasing the generosity and coverage of existing schemes, and increasing its efficiency and transparency. We will also engage the provinces on sharing the social expenditure burden under BISP. Other priority areas will include increasing our investment in human capital, further developing our governance and anti-corruption

frameworks, completing the reforms of the bank resolution and deposit insurance framework while addressing undercapitalized banks, and building climate resilience.

5. Overall, we believe that the policies set out here are adequate for the successful implementation of our program and we will consult with the IMF on the adoption of any new measures. We will continue to supply the IMF with timely and accurate data as agreed and consent to the IMF’s publication of this letter, the TMU, and accompanying Executive Board documents.

6. Based on our strong program performance and our commitments for the period ahead, we request approval by the IMF Executive Board of the completion of the second review under the SBA and the related purchase in the amount of SDR 828 million (40.8 percent of quota).

Table 1. Pakistan: Quantitative Performance Criteria and Indicative Targets, FY2023/24 1/

(Billions of Pakistani rupees, at program exchange rates, unless otherwise indicated)

end-September 2023 end-December 2023

Program Adjusted Actual Status Program Program Adjusted Actual Status

CR 23/260 Prog. CR 23/260 CR 24/17 Prog.

I. Quantitative Performance Criteria

Floor on net international reserves of the SBP (millions of U.S. dollars) -14,550 -15,673 -13,781 Met -13,800 -13,400 -14,670 -12,720 Met

Ceiling on net domestic assets of the SBP (stock, billions of Pakistani rupees) 15,048 15,370 14,410 Met 14,888 14,450 14,814 14,319 Met

Ceiling on SBP’s stock of net foreign currency swaps/forward position (negative, millions of U.S. dollars) 3/ 4,200 … 3,540 Met 4,000 … … 3,423 Met

Ceiling on net government budgetary borrowing from the SBP (stock, billions of Pakistani rupees) 4,708 … 4,380 Met 4,708 4,708 … 3,217 Met

Ceiling on the general government primary budget deficit (cumulative, excl. grants, billions of Pakistani rupees) 2/ -87 -389 -376 Not met -1,232 -1,420 -1,402 -1,812 Met

Ceiling on the amount of government guarantees (stock, billions of Pakistani rupees) 4,000 … 3,806 Met 4,050 4,050 … 3,748 Met

Cumulative floor on targeted cash transfers spending (BISP) (billions of Pakistani rupees) 87.5 … 89.8 Met 185.5 185.5 … 186.1 Met

II. Continuous Performance Criteria

Zero new flow of SBP’s credit to general government 0 … 0 Met 0 0 … 0 Met

Zero ceiling on accumulation of external public payment arrears by the general government 0 … 0 Met 0 0 … 0 Met

III. Indicative Targets

Cumulative floor on general government budgetary health and education spending (billions of Pakistani rupees) 465 … 482 Met 1,031 905 … 1,007 Met

Floor on net tax revenues collected by the FBR (cumulative, billions of Pakistani rupees) 1,977 … 2,042 Met 4,425 4,425 … 4,469 Met

Ceiling on net accumulation of tax refund arrears (cumulative, billions of Pakistani rupees) 32 … -15 Met 43 43 … -31 Met

Ceiling on power sector payment arrears (cumulative flow, billions of Pakistani rupees) -155 … 227 Not Met 64 385 … 378 Met

Table 2. Pakistan: Structural Conditionality Under the SBA

Actions

Structural Benchmarks Date Status

Fiscal

1 Commit to not grant further tax amnesties. Continuous Met.

2 Avoid the practice of issuing new preferential tax treatments or exemptions. Continuous Met.

3 Issuance by the Central Monitoring Unit (CMU) of its first periodic report on the performance end-Dec. 2023 Met.

Social

4 Inflation adjustment of the unconditional cash transfer (Kafaalat). end-Jan. 2024 Met.

Monetary and Financial

5 Average premium between the interbank and open market rate will be no more than 1.25 Continuous Met.

percent during any consecutive 5 business day period.

6 Submission to parliament of amendments to align Pakistan’s early intervention, bank end-Dec. 2023 Met.

resolution, and crisis management arrangements with international good practices, in line with

7 Develop a plan to strengthen internal control systems in lending operations, including updates March 8, 2024 Met.

to collateral policy and counterparty eligibility policy, in line with recommendations from the

2023 Safeguards Assessment.

Energy Sector and State-Owned Enterprises

8 Notification of the annual rebasing (AR) for FY24 to take effect on July 1, 2023. end-Jul. 2023 Met.

9 Notification of the December 2023 semiannual gas tariff adjustment determination. February 15, 2024 Met.

10 Improve state-owned enterprise (SOE) governance by: (i) operationalizing the recently end-Nov. 2023 Not met.

approved SOE law into a policy that clarifies ownership arrangements and the division of roles

within the federal governments; and (ii) amending the Acts of four selected SOEs to make the

new SOE law fully applicable to those SOEs.

Climate

11 Cabinet adoption of a Climate-PIMA and PIMA action plan. end-Dec. 2023 Met.

Economic Statistics

12 Compilation and dissemination of Quarterly National Accounts for FY24Q1 and revised annual end-Nov. 2023 Met.

estimates for FY23.

1. This Technical Memorandum of Understanding (TMU) sets out the understanding between the Pakistani authorities and the IMF staff regarding: (i) the definitions of quantitative performance criteria (and their adjustment mechanisms), indicative targets, and—if needed—prior actions and structural benchmarks in Section A below; and (ii) the respective reporting requirements used to monitor developments—for the economic program under the Stand-By Arrangement (SBA)—as described in the authorities’ latest Letter of Intent (LOI) dated December 18, 2023, and the attached Memorandum of Economic and Financial Policies (MEFP, notably its Tables 1 and 2) in Section B below. To this effect, the authorities will provide the necessary data to the IMF as soon as it becomes available. The definitions used in this TMU will be adjusted to reflect any changes in program design and accounting classifications introduced during the program period.

Text Table 1. Pakistan: Program Exchange Rates

(Units of currency per U.S. dollar) 1/

Currency Rate Currency Rate

EUR 0.918274 THB 35.200194

JPY 143.118405 MYR 4.676498

CNY 7.231199 SGD 1.352850

GBP 0.785114 INR 82.008266

AUD 1.498464 SAR 3.750498

CAD 1.316900 SDR 0.749411

2. For purposes of monitoring under the program, all assets and liabilities as well as debt contracted, denominated in Special Drawing Rights (SDRs) or in currencies other than the U.S. dollar, are converted into U.S. dollars at the program exchange rates. The program exchange rate of the Pakistani rupee to the U.S. dollar is set at 286.7091 rupee per one U.S. dollar. The corresponding cross exchange rates for other foreign currencies are provided in Text Table 1.

DEFINITION OF PERFORMANCE CRITERIA AND INDICATIVE TARGETS

A. Overview

3. The program sets performance criteria and indicative targets for defined test dates (MEFP Table 1) as well as defines continuous performance criteria that apply throughout the program period. The program sets the following performance criteria:

• Performance Criteria.

o Floor on the net international reserves (NIR) of the State Bank of Pakistan (SBP) (millions of U.S. dollars);

o Ceiling on the net domestic assets (NDA) of the SBP (stock, billions of Pakistani rupees);

o Ceiling on SBP’s stock of net foreign currency swap/forward position (millions of U.S. dollars);

o Ceiling on the general government primary budget deficit excluding grants (cumulative flows, billions of Pakistani rupees);

o Ceiling on net government budgetary borrowing from the SBP (including provincial governments) (stock, billions of Pakistani rupees);

o Ceiling on the amount of government guarantees (stock, billions of Pakistani rupees); and

o Floor on targeted cash transfers spending (BISP) (cumulative, billions of Pakistani rupees).

• Continuous Performance Criteria.

o No new flow of SBP’s credit to general government;

o Zero ceiling on the accumulation of external payment arrears by the general government; and Other.

• Indicative Targets.

o Floor on general government budgetary health and education spending (cumulative, billions of Pakistani rupees);

o Floor on net tax revenues collected by the Federal Board of Revenue (FBR) (cumulative, billions of Pakistani rupees);

o Ceiling on net accumulation of tax refund arrears (flow, billions of Pakistani rupees); and

o Ceiling on power sector payment arrears (flow, billions of Pakistani rupees).

B. Performance Criteria

B.1. Floor on the Net International Reserves (NIR) of the SBP

Definition

4. The general government is defined as the central (federal) government and local (provincial) governments, excluding state-owned enterprises. The definition of the general government includes any new funds, or other special budgetary or extra-budgetary entities, that may be created during the program period to carry out operations of a fiscal nature as defined in

the IMF’s Manual on Government Finance Statistics 2014. The authorities will inform IMF staff on the creation of any such entities without delay.

5. Net international reserves (stock) of the SBP are defined as the U.S. dollar value of the difference between usable gross international reserve assets and reserve-related liabilities, evaluated at program exchange rates.

6. Usable gross international reserves of the SBP are readily available claims on nonresidents denominated in foreign convertible currencies and controlled by the monetary authorities for meeting balance of payments financing needs, for intervention in exchange markets to affect the currency exchange rate, and for other related purposes. Gross official reserves include: (i) holdings of foreign currencies; (ii) holdings of SDRs; (iii) the reserve position in the IMF; and (iv) holdings of fixed and variable income instruments. Excluded from usable reserves, inter alia, unless there is also a reserve-related liability associated with it, are: (i) claims on residents; (ii) assets in nonconvertible currencies; (iii) precious metals; (iv) illiquid assets; (v) assets that are pledged or collateralized; (vi) any reserve assets that are not readily available for intervention in the foreign exchange market because of lack of quality or liquidity that limits marketability at the book price; and (vii) balances held at foreign branches of non-investment rated domestic banks.

7. Reserve-related liabilities of the SBP include all foreign exchange liabilities to residents (except general government) or nonresidents, including: (i) foreign currency liabilities, excluding liabilities to the general government, with remaining maturity of one year or less; (ii) any foreign exchange liabilities of SBP and general government arising from derivatives positions (such as futures, forwards, swaps, and options) on a net outstanding basis (defined as the long position minus the short position); (iii) outstanding IMF credits to Pakistan; and (iv) foreign exchange deposits with the SBP of foreign governments, foreign central banks, foreign deposit money banks (excluding regulatory capital deposits of foreign banks with the SBP), international organizations, and foreign nonbank financial institutions, as well as domestic financial institutions (excluding regulatory capital deposits of domestic financial institutions with the SBP). The reserve-related liabilities of the SBP exclude SDR allocations and accrued interest on reserve-related liabilities.

8. Aggregate net position in the foreign exchange derivatives is defined as the aggregate net positions in forwards and futures in foreign currencies of the SBP and general government vis-a-vis the domestic currency (including the forward leg of currency swaps).

9. Gross sale of foreign exchange includes outright and swap sales of foreign exchange by the SBP to banks in the foreign exchange interbank market by using foreign exchange market intervention. The swap sale of foreign exchange and maturities of the forward transactions will be measured on a net daily basis.

10. Net purchase of foreign exchange is defined as outright and swap purchases of foreign exchange minus outright and swap sales of foreign exchange by the SBP from/to banks in the foreign exchange market by using foreign exchange market intervention. The net purchase of foreign exchange will be measured on a net daily basis.

Adjustment Mechanism

11. For the end-December 2023 test date, the floor on NIR will be adjusted upward (downward) by the cumulative excess (shortfall) in cash inflows usable for the financing of the government budget from multilateral and bilateral creditors, commercial borrowing, and bond issuance relative to the projected inflows (Table 1). Cumulative cash inflows usable for the financing of the government budget are defined as external disbursements (including grants) from official multilateral creditors (including, but not limited to the Asian Development Bank, Islamic Development Bank, and World Bank), official bilateral creditors (including, but not limited to bilateral oil facilities, China, Saudi Arabia, UAE, DFID-UK, and USAID), external bond placements and other commercial borrowings that are usable for the financing of the central government budget, plus proceeds from sales of state-owned assets to official bilateral partners, sovereign wealth funds. Downward adjustment of the floor on NIR will be limited to a maximum of US$2,000 million for the December 2023 test date.

B.2. Ceiling on the Net Domestic Assets (NDA) of the SBP

Definition

12. Net domestic assets of the SBP are defined as the difference between reserve money (as defined below) minus the NIR of the SBP (as defined above). For the purposes of computing the NDA target, the NIR is valued at the program exchange rate (¶2) and expressed in Pakistani rupee.

13. Reserve money (RM) is defined as the sum of: (i) currency outside schedule banks (deposit money banks); (ii) schedule banks’ domestic cash in vaults; (iii) schedule banks’ required and excess rupee and foreign exchange deposits with the SBP; and (iv) deposits of the rest of the economy with the SBP, excluding those held by the federal and provincial governments and the SBP staff retirement accounts.

Adjustment Mechanism

14. Consistent with the NIR target adjustment mechanism (as defined above), the ceiling on the NDA will be adjusted downward (upward) by the cumulative excess (shortfall) in cash inflows from multilateral and bilateral creditors, and commercial borrowings and bond issuances relative to the projected inflows (Table 1) and evaluated at the program exchange rate. As in the case for NIR, the upward adjustment of the ceiling on NDA will be limited to the same maximum adjustor limit set for NIR evaluated at the program exchange rate.

B.3. Ceiling on SBP’s Stock of Net Foreign Currency Swap/Forward Position

15. The stock of net foreign currency swap/forward positions is defined as the aggregate

net positions in forwards and futures in foreign currencies of the SBP vis-à-vis the domestic currency

(including the forward leg of currency swaps). It will be evaluated at the program exchange rate.

B.4. Ceiling on the General Government Primary Budget Deficit Excluding Grants

Definition

16. The general government primary budget deficit (excluding grants) is monitored quarterly as the general government’s overall budget deficit (excluding grants) minus the consolidated interest bill of the federal and provincial budgets.

17. The general government overall budget deficit (excluding grants) is measured as the cash deficit from below the line, defined as the sum of:

a. net external budget financing, excluding valuation changes, with foreign currency disbursements/payments converted into PRs at the actual exchange rates applied to each transaction;

b. change in net domestic credit from the banking system (cash basis), excluding valuation changes from deposits denominated in foreign currency and government securities bought by non-residents (notably T-bills, Pakistan Investment bonds (PIBs), Naya Pakistan Certificates, and Banao Certificates);

c. change in the net domestic nonbank financing, excluding valuation changes. These comprise: (i) privatization receipts (either received directly or transferred from the privatization accounts to the general government budget, including from abroad and in foreign currency); (ii) change in the stock of issued government securities held outside the general government and the banking system, net of valuation changes; (iii) change in net deposits and reserves received by the general government (public accounts deposits); (iv) any other government borrowing from domestic nonbank sources net of repayments; minus (v) change in general government deposits with nonbank financial institutions; and

d. total external grants to the federal and provincial governments, which are defined as the sum of project grants, cash external grants for budgetary support, capital grants reflecting the principal amounts of external debt cancellation or swaps, and other grants. External grants in foreign currencies are converted into PRs at the actual exchange rates applied to each transaction.

18. Net external budget financing (excluding valuation changes and all external financing counted as reserve liabilities of the SBP, as defined above) is defined as the sum of:

a. external budget loans to the general government, including those on-lent to financial institutions and companies (public or private) and external emergency relief lending. It comprises those with: (i) medium- and long-term maturity from official multilateral sources (including IMF budget support), official bilateral sources, and private sector sources (e.g., bonds and non-residents’ purchases of PIBs, Naya Pakistan Certificates, and Banao Certificates); and (ii) short-term maturity, net of foreign portfolio investment excluding non-residents’ purchases of Naya Pakistan Certificates and Banao Certificates but including non-residents’ purchases of domestic T-bills; and

b. net external debt amortization flow of the general government, which is the change in its stock of external debt service arrears net of the debt amortization due on its external budget loans (with the latter accounting for the impact of any rescheduled, relieved, or accelerated amortization, including that related to debt swaps or debt cancellation recorded as capital grants).

Adjustment Mechanism

19. The ceiling on general government primary budget deficit (excluding grants) for the end- December 2023 test date will be adjusted on a cumulative basis since the beginning of the fiscal year:

a. downward (upward) by any shortfall (excess) in external project financing during the period October-December 2023 relative to the program projections (US$664 million for October- December 2023) evaluated in Pakistani rupee terms at actual average quarterly exchange

rates. For avoidance of doubt, no adjustment will be made for the period July-September 2023 (actual external project financing US$333 million). External project financing is defined as disbursements from bilateral and multilateral creditors to the general government for specific project expenditure;

b. downward by any underexecution in the targeted cash transfers (BISP) relative to their indicative program targets (PRs 185.5 billion for July-December 2023);

c. downward by any excess in the flow of power sector payment arrears above the respective indicative program targets (PRs 385 billion for July-December 2023), excluding non-recoveries (relative to the projection of PRs 255 billion for July-December 2023) and excess line losses (relative to the projection of PRs 76 billion for July-December 2023); and

d. downward by any excess in the flow of tax refund arrears (as defined below) relative to their respective indicative program targets (PRs 43 billion for June-December 2023).

B.5. Ceiling on Net Government Budgetary Borrowing from the SBP

Definition

20. Net government budgetary borrowing from the SBP (including provincial governments) is defined as SBP claims on the general government minus general government deposits with the SBP. Those claims include government securities, treasury bills, treasury currency, and debtor balances, whereas those claims exclude accrued profits on government securities. Government deposits with the SBP exclude the Zakat Fund.

B.6. Ceiling on the Amount of Government Guarantees

21. The ceiling on the amount of government guarantees applies to the stock of publicly guaranteed debt for which guarantees have been issued by the central government. It includes both domestic and external government guarantees. External government guarantees will be converted into Pakistani rupees at the program exchange rate. This ceiling excludes guarantees issued by the Ministry of Finance for the SBP borrowing from the IMF.

B.7. Floor on Targeted Cash Transfers Spending (BISP)

22. The floor on targeted cash transfers spending (BISP) applies to the cumulative targeted cash transfers spending by the Benazir Income Support Program (BISP), i.e., all spending on BISP programs.

C. Continuous Performance Criteria

C.1. No New Flow of SBP’s Credit to General Government

23. To protect the capability of the central bank to pursue its price stability objective, there should be no new flow of SBP’s direct credit to the general government, including in the form of purchases of public debt securities on the primary market. The performance criterion applies on a continuous basis throughout the program period.

C.2. Zero Ceiling on the Accumulation of External Payment Arrears by the General Government and SOEs

24. External payment arrears are defined as all unpaid debt-service obligations (i.e., payments of principal and interest) of the general government (federal and provincial government, and SBP), and state-owned enterprises to nonresidents arising in respect of public sector loans, debt contracted or guaranteed (including unpaid penalties or interest charges associated with these obligations that are beyond 30 days after the due date). The definition of debt, for the purposes of the SBA, is set out in ¶8 of 2020 Guidelines on Public Debt Conditionality in Fund Arrangements. The ceiling on the accumulation of external payment arrears is set at zero. The performance criterion applies on a continuous basis throughout the program period.

C.3. Other Continuous Performance Criteria

25. During the program period, Pakistan will not:

a. impose or intensify restrictions on the making of payments and transfers for current international transactions;

b. introduce or modify multiple currency practices (MCPs) excluding those MCPs arising from the introduction and/or modifications of the multiple-price foreign exchange auction system operating in line with IMF staff advice with the objective of supporting flexible market-determined exchange rate;

c. conclude bilateral payment agreements that are inconsistent with Article VIII of IMF Articles of Agreement; and

d. impose or intensify import restrictions for balance of payments purposes.

D. Indicative Targets

D.1. Floor on General Government Budgetary Health and Education Spending

26. The floor on the general government budgetary health and education spending will apply to the cumulative budgetary spending on health and education by the federal and provincial governments.

D.2. Floor on Net Tax Revenues Collected by the Federal Board of Revenue (FBR)

27. Net tax revenues collected by the FBR are defined as the sum of revenues collected from: (i) general sales tax (GST) on goods (including GST on services collected in Islamabad Capital Territory); (ii) customs duties, customs registration fees and levies; (iii) excise duties on imported products; (iv) excise duties on domestic products; (v) levies (toll) on oil derivatives; (vi) other proceeds and fees; (vii) sales tax; and (viii) unclassified revenues (including income tax) minus the tax refunds. Net revenue collection is defined, for each test date, as the cumulative sum of net revenues collected since the beginning of the respective fiscal year. The floor on the collection of net revenues by the FBR is measured quarterly based on cumulative end-of-quarter data.

D.3. Ceiling on Net Accumulation of Tax Refund Arrears

28. The ceiling on the net accumulation of tax refund arrears applies to the cumulative flow of tax refund arrears. The stock of tax refund arrears is defined as the amount of tax refund claims that have not been settled (through a cash refund, netting out against obligations of taxpayers, payment with a government bond/promissory note or an official decision to reject the claim) within a specified time period after the tax refund claim has been submitted to the FBR. The stock of income tax refund arrears is PRs 215.2 billion as of end-May 2023, and the net accumulation of income tax refund arrears will be counted from the starting point of PRs 215.2 billion; the stock of sales tax arrears at end-May 2023 is PRs 183.8 billion, and the net accumulation of sales tax refund arrears will be counted from the starting point of PRs 183.8 billion.

D.4. Ceiling on Power Sector Payment Arrears

29. Power sector payment arrears are defined as power sector payables in arrears that arise from: (i) non-recoveries from supply to Azad Jammu and Kashmir (AJ and K), industrial support package, other federal and provincial governments including FATA, private consumers, and Baluchistan Tube Wells; (ii) accrued markup from the servicing of PHPL; (iii) line losses and non-collections that are not recognized by NEPRA; (iv) GST non-refunds,; (iv) late payment surcharges; (v) delays in subsidy payments; and (vi) delays in tariff determinations.

PROGRAM REPORTING REQUIREMENTS

30. To effectively monitor the program performance, the authorities will provide all the needed data to the IMF in line with Article VIII, Section 5 of the IMF Articles of Agreement as deemed necessary. Performance under the program is monitored from data supplied to the IMF by the SBP, Ministry of Finance, FBR, Pakistan Bureau of Statistics, Ministry of Energy (Power and Petroleum Division), and other agencies as outlined in Table 2 below. Irrespective of the requirements outlined in Table 2, the authorities will report on an ongoing/continuous basis any non-observance of continuous PCs. The authorities will transmit promptly to IMF staff any data revisions as well as other information necessary to monitor the arrangement with the IMF.

Table 1. Pakistan: Projected Disbursements

(Millions of U.S. dollars)

FY24

Jul-Sep 2023 Oct-Dec 2023

Est. Proj.

Multilateral and bilateral disbursements 3,832 5,893

of which: in cash 1/ 3,693 5,647

of which: Saudi oil facility and IDB commodity loans 400 350

of which: project support 333 664

of which: sales of state-owned assets 0 0

International bond issuance 2/ 28 0

Commercial borrowing 0 600

Other 0 0

Gross inflows 3,860 6,493

of which: in cash 3,721 6,247

memo: New loans/deposits at SBP 3/ 1,000 0

Table 2. Pakistan: Monitoring and Reporting Requirements

Reporting Type of Data Description of Data Frequency Timing

Agency

State Bank of SBP balance sheet Summary Weekly First Thursday of the

Pakistan following week

(SBP) SBP balance sheet Summary at program exchange rates; and by Monthly Within 15 days of the

official exchange rates end of each month

Monetary survey Summary banking system balance sheet for the Monthly Within the first

central bank at both program exchange rates and 30 days of each

by chart of accounts at actual official exchange month.

rates; the consolidated balance sheet of commercial

banks at actual official exchange rates

International By (i) program exchange rates; and (ii) at actual Daily The following working

reserves official exchange rates. day

International Inflows/outflows into/out of Naya Pakistan Daily The following working

reserves Certificates. day

Foreign exchange Market exchange rates (buying and selling); Daily/ Within one day/

market weighted average customer exchange rate; monthly Monthly monthly within five

trade volume, and high and low exchange rate of working day

the interbank, the KERB market.

Foreign exchange SBP foreign exchange operations, and intervention Daily Within one day

market (volume), distinguishing within spot transactions

the outright purchase/sale and purchase/sale

related to forward contract

Foreign exchange SBP operation against the domestic currency in Daily Within one day

market swap/forwards by (volumes)

Foreign exchange SBP operations against the domestic currency in Daily Within one day

market swap/forwards (including all legs of transactions):

for each day, the initial outstanding FX

swap/forward position, summary of transactions

during the day, the end-of-day position

Foreign exchange Interbank market transactions in the spot market Daily Within one day

market for US dollars: total value transacted in US$, total

number of transactions, number of banks involved

in transactions, average value transacted in US$

(simple mean, untrimmed), weighted average price

transacted (untrimmed), simple average price

transacted (simple mean, untrimmed), standard

deviation of values transacted (untrimmed), and

standard deviation of prices transacted

(untrimmed).

State Bank of Foreign exchange Interbank market transactions in the forward Daily Within one day

Pakistan market market for US dollars: total value transacted in US$,

(SBP) total number of transactions, number of banks

involved in transactions, average value transacted

in US$ (simple mean, untrimmed), standard

deviation of values transacted (untrimmed),

average maturity (simple mean, untrimmed),

standard deviation of maturity (untrimmed).

Foreign exchange Aggregate customer transactions of commercial Weekly Third working day of

market banks, with breakdown into gross sales and the following week

purchases.

Foreign exchange Breakdown of short, long, counterparts, of the Daily Within one day

market swap/forward contracts

Foreign exchange Outstanding swap/forward positions by maturity Monthly Third working day of

market buckets, and counterparties. the following month

Net International Net International reserves at program exchange Quarterly Seventh working day

Reserves rates as defined in TMU, including a breakdown by after quarter end

currency and specification of nostro balances with

foreign branches of National Bank of Pakistan.

External financing Foreign assistance received and projections for the Quarterly Within 15 days of the

coming four quarters. Please categorize all grants end of each quarter

and loans by program/project, and the amounts

received/expected in cash.

Interbank money Daily interbank repo volume and interest rate of Daily Within one day

market trades

SBP operations Repo (reverse repo) operations, open market Weekly First Monday of the

operations following week

Bank liquidity Excess reserves, in local currency Bi-weekly With a lag of 15 days

T-bill and coupon Auction data: date, original and remaining Fortnightly Last working day of

bond financing, SBP maturities, issuance volume, allocation, average the fortnight

securities yield and coupon yield (if available)

Banking data Sectoral distribution of loans and deposits; loans Monthly Within 25 working

and deposits by local and foreign currency; deposit days of the end of

and lending rates, disaggregated between new each month

operations and outstanding stock

Banking data Loan maturities Quarterly Within 45 days of the

following quarter

Banking data Regularity capital deposit requirement deposits of Monthly Within 15 days of the

foreign and domestic schedule banks with the SBP end of each month

(account numbers 33052 and 330506)

State Bank of Banking indicators Core Financial Stability Indicators (FSIs), including Quarterly Within 45 days of the

Pakistan but not limited to capital adequacy; asset following quarter

(SBP) composition and quality; profitability; liquidity;

open FX positions in aggregate and bank-by-

bank (without names)

Banking indicators Liquidity data and deferred/restructured loans Weekly Within 5 days of the

end of each week

Banking data Banks’ net open foreign exchange positions split Monthly Within five days of the

between total foreign assets and foreign exchange end of each month

liabilities: in aggregate for the system and bank by

bank (without names, but with consistent identifiers

across datasets)

Banking data Holdings of government securities in aggregate Monthly Within 7 days of the

and bank-by-bank (without names, but with end of each month

consistent identifiers across datasets)

Banking sector Results of stress tests on exchange rate, liquidity, Quarterly Within 60 days

stress tests and credit risk

Transfers Workers’ remittances. Monthly Within 25 days of the

following month

Other monetary The SBP survey, ODCs and DCs published in IFS. Monthly Within 45 days of the

data end of each month

SBP refinance Outstanding position under SBP refinance schemes Monthly Within 25 days of the

schemes (by program) end of each month

Balance of payments Detailed export and import data Monthly Within 28 days of the

Detailed balance of payments data end of each month

Privatization Balance on the PC Fund account; gross inflows into Quarterly Within seven days of

receipts and outflows from the PC Fund account during the the end of each

month, specifying the nature of each transaction quarter

Ministry of External debt Disbursements and stock of outstanding short-term Monthly Within 25 days of the

Finance and contracting or guaranteeing and outstanding following month

(MOF) stock of medium-and long-term external debt of

the government, the SBP, and state-owned

companies; any stock of arrears on external debt

service and outstanding stock of government

guarantees and external arrears.

External financing Foreign assistance received and projections for the Quarterly Within 15 days of the

coming four quarters. Please categorize all grants end of each quarter

and loans by program/project, and the amounts

received/expected in cash and in kind.

External financing List of all disbursements and amortization Quarterly Within 25 days of the

payments for external budget financing and end of each quarter

external grants (above US$3 million or equivalent),

including date of the transaction, foreign currency

amount, exchange rate applied, rupee amount

credited, creditor (or donor agency).

Ministry of Domestic financing Gross disbursements and amortization of Naya Quarterly Within 25 days of the

Finance Pakistan Certificates by residents. end of each quarter

(MOF) Domestic debt Domestic debt composition Monthly Within 25 days of the

end of each month

Domestic debt T-Bill and PIB Bid sheet from domestic debt Daily Within 1 day of each

auctions T-Bill and PIB auction

Federal government State budget Monthly Within 30 days of the

end of each month

Federal government Government guarantees – issued and executed Quarterly Within 15 days of the

(reported separately). Name of entity receiving the end of each quarter

guarantee and the value of the guarantee.

Consolidated Federal and provincial governments (including Quarterly Within 45 days of the

general government fiscal outcomes broken down by province) end of each quarter

Consolidated Federal and provincial governments Annual Within 180 days of

general government the end of each year

Federal government Fiscal financing sources: Detailed quarterly Monthly One month in

financing plan for the coming 12 months including advance

projections for domestic public securities (issuance

and maturities), external financing, SBP profits,

short-term borrowing, other financing schemes,

and borrowing from the SBP.

General government Total general government budgetary spending on Monthly Within 15 days of the

health and education broken down into spending end of each month

by the federal and provincial governments

Federal government Stock of government borrowing from the SBP Quarterly Within the first five

days of each quarter.

Pakistan SPI, CPI, WPI Detailed monthly price indices Monthly Within five days of the

Bureau of following month

Statistics CPI Index of core inflation Monthly Within 21 days of the

(PBS) end of each month

Federal Board Revenue collection Total revenue collected separately by the tax Monthly Within seven days of

of Revenue Tax credits administration and customs administration, the end of each

(FBR) including revenue by individual tax, and social month

contributions.

Tax arrears By category Monthly Within seven days of

each month

By type of tax Monthly Within seven days of

the end of each

month

All tax refund claims Itemized by tax category (GST, income, customs Monthly Within seven days of

in arrears duties, etc.) the end of each

month

Federal Board Detailed data, by type of tax, of outstanding tax Quarterly Within seven days of

of Revenue Automated GST credits for all types of tax revenues the end of each

(FBR) refunds month

Number of refunds that were processed Quarterly Within seven days of

automatically (share of total refunds); total value the end of each

of automated and automatic refunds and offsets; month

average waiting time (days) to receive refund

Large taxpayers Data on the number of taxpayers and amount of Quarterly Within seven days of

taxes managed by the large taxpayer units (LTUs) the end of each

month

Import data Total value of recorded imports Quarterly Within 30 days of the

Total value of duty-paid recorded imports; end of each quarter

Number of total transactions involving recorded

imports;

Number of total transactions involving nonduty

free recorded imports

Audits Percentage of selected companies and identified Quarterly Within 45 days of the

revenue from audits end of each month

(monthly data

provided on a

quarterly basis)

Ministry of Key Power Sector Statistics (Please see the Quarterly Within 30 days

Water and attached template)

Power Cumulative Monthly Subsidy Position (Rs. Billion)

PEPCO Month End Payables and Receivables

Positions And Aging Schedule, PR. Billion

Receivables Positions – Total and DISCO-wise

Break-up

CPPA/PEPCO Month-wise Consolidated Cash Flow

AT&C Statistics

Monthly TDS Claims by DISCOs and Total

Inter Corporate Circular Debt Sheet Prepared by

Ministry of Finance

DISCOs Consolidated Income Statement

Net Electrical Output & Power Purchase Price by

Source, GWh

Generation, Demand and Shortfall for FY10 to

date

Net Electrical Output (MkWh) Plant and Fuel-wise

Detail

Working Capital Loans For each loan type

Quantitative target Quarterly quantitative targets for each DISCO for Quarterly Within 30 days from

on performance of technical and distribution losses, collection from the end of the quarter

DISCOs current consumers and recoveries of arrears.

Domestic Energy arrears (stock) Quarterly Within 45 days of the

expenditure arrears Flow of arrears by source end of each month for

government arrears

Determined and Notified Tariff’s for each User Annual Within 30 days of

and User Group (Please see template) determination and

notification

Ministry of Gas supply by consumer category Quarterly Within 60 days from

Petroleum Gas sales by consumer category on monthly the end of the quarter

and Natural frequency

Resources Gas prices by consumer category Biannually Within 30 days of

price notification.

UFG losses Quarterly Within 60 days from

the end of the quarter

BISP Targeted cash Coverage (number of beneficiaries paid) and Quarterly Within 30 days from

transfers payment by all BISP programs. the end of the quarter

Ministry of Financial statements Financial statements (cash flow, income Quarterly Within 30 days from

Finance statement, and balance sheet) and operational the end of the quarter

indicators for Pakistan Railways, Pakistan Steel

Mills and Pakistan International Airline

Statement by Mr. Bahador Bijani and Mr. Saif Ullah Dogar

April 29, 2024

On behalf of our Pakistani authorities, we thank Mr. Porter and his team for their untiring efforts and close engagement since the start of the Standby Arrangement (SBA) in July 2023. The team deserves special appreciation for the policy advice helping Pakistan to complete all actions committed under the previous Extended Fund Facility (EFF), which although could not be completed fully for technical reasons, led to a seamless transition to the SBA. Our authorities have lived up to their commitment by meeting all targets agreed under the program and complete the second review under the SBA. Our authorities also profoundly appreciate the continued support of Management and the Executive Board during these unusually complex and challenging times. Our Pakistani authorities would also like to thank Pakistan’s bilateral and multilateral partners for their generous support.

I. Recent Developments

In March 2024, a newly elected government came into power after almost seven months of a caretaker government, which continued the steadfast implementation of the SBA just as was agreed between the outgoing elected government and the Fund. The current coalition government consists of almost the same political parties which despite heavy political cost implemented all the actions committed under the EFF program and approved all the prior actions under the SBA. The return of the outgoing government to power after the elections means continued commitment to the reform agenda agreed at the time of the SBA. This not only means a higher likelihood for the continuity of reforms but also political stability for the next five years. Although the elections were followed by litigation against the election results in some constituencies at the Election Commission of Pakistan and superior courts, the initial decisions in the favor of the sitting government have reinforced legitimacy and stability to the constitutional and political system of the country. The socio-political tensions have attenuated following the elections and confidence has returned following the Staff Level Agreement (SLA) for the completion of the second review.

II. Economic Recovery

On the economic front, Pakistan’s economic and financial position continues to improve reflecting prudent policy management and the resumption of inflows from multilateral and bilateral partners. The economic recovery can be witnessed over the last two quarters and inflation has started to decline with the core inflation hovering around 15 percent from its peak of 38 percent in May 2023. The SBP maintained the policy rate at 22 percent at its last meeting on March 18, 2024—the same rate since June 2023—due to continued elevated inflation expectations. The SBP is committed to bringing inflation down to the medium target of 5-7 percent in the second half of 2025 through data-driven and appropriately tight monetary policy stance.

Pakistan ran current account deficit of US$ 17.5 billion in FY22, which was about 4.7 percent

of the GDP. The current account posted a surplus of US$ 619 million in March 2024 as opposed to monthly average deficit of US$ 1.46 billion in 2022 and US$ 0.19 billion in 2023. It is six times higher than in the previous month and the highest monthly surplus in the last nine years. Overall, during the nine months of FY24 (July 2023-March 2024), the current account balance stood at a deficit of only US$ 0.5 billion (0.15 percent of GDP) compared with to a deficit of than US$ 4 billion (1.15 percent of GDP) in the corresponding period of the last FY. The ongoing efforts in policy reform are easing pressures on the gross financing needs in an increasingly uncertain and complex external environment. The key factor for this improvement is a decline in the trade deficit in goods with both exports and imports of goods and services declining but, with balance on primary income improving due to lower primary income debit. With these trends, the current account is expected to remain well within the sustainable limit in FY24.

On the fiscal side, during July-March FY24, tax collection by the Federal Board of Revenue (FBR) increased by 30 percent compared to the corresponding period last FY, with the net federal revenues in July-February grew by 51 percent. On the expenditure side, total expenditure increased by 45 percent during July-February FY24, with current spending rising by 46 percent primarily due to a 59 percent increase in markup payments. In the first eight months of FY24 the primary surplus stands at (1.7 percent of the GDP), compared to a surplus of 0.9 percent during the corresponding period last FY. The overall deficit in the first eight months of the current fiscal year is estimated at 3.0 percent of GDP against 2.8 percent of GDP last year owing to higher costs of debt servicing.

On the back of a strong growth in agriculture, the recovery of the large-scale manufacturing sector is expected to continue during the remaining months of FY24, with high-frequency indicators signaling continued growth. Increasing external and fiscal sustainability is adding to confidence and contributing to economic recovery. Strict adherence to the SBA targets and expectations of a successful conclusion of the second review have enhanced positive investor sentiment, witnessed by the strong performance of the Pakistan Stock Exchange (PSX). The PSX closed at a record high on April 22, 2024. Despite all positive developments, the authorities realize that sustained economic recovery is contingent on their commitments to a prudent policy stance, supported by timely and adequate financial inflows to meet the external gross financing needs.

III. Program Performance

Pakistan’s program performance has remained strong, which holds testimony to the authorities’ resolute commitment to a broad and deep agenda of reforms to ensure fiscal consolidation and debt sustainability as prerequisites of economic growth and poverty alleviation. All seven performance criteria were met. The authorities also met all four indicative targets and six structural benchmarks. The authorities continue to work on an extended agenda of SOE reforms and privatization.

IV. Way Forward

The authorities remain committed to the reforms supported by IMF programs. In fact, the authorities have an expansive home-brewed additional agenda of structural reforms, which they have been sharing with staff for alignment with the Fund’s policy advice. Increasing tax-to- GDP ratio materially, expanding the social safety net, reforming and/or privatizing SOEs, digitalizing the economy, and ensuring financial sustainability of the energy sector remain the priority areas for future reforms. The authorities are cognizant that the delay in investment into human capital and critical infrastructure may result in loss of hard-earned development gains of the past decades. To arrest and reverse the declining outcomes in social sectors, it is of utmost importance that early fiscal consolidation ultimately leads to sustained, inclusive economic growth and investment in areas that buttress growth and development.

Our Pakistani authorities are also highly appreciative of Fund’s support in the form of capacity development and technical assistance that now include areas related to monetary policy, tax policy, budgeting, and debt management. In areas of SOE governance and social protection, the World Bank and Asian Development Bank have been area already assisting.

It is worth highlighting that the creation of the Special Investment Facilitation Council (SIFC) and Sovereign Wealth Fund (SWF) are initiatives to enhance broad-based institutional ownership and coordination across the government. The authorities seek to ensure timely structural reforms in tax collection machinery and divestment of entities which have been drags on the national exchequer and have restricted the fiscal space for investment in human capital and climate resilience infrastructure.

The authorities believe that the completion of the SBA will prove to be a significant milestone in their journey toward economic stability and growth. Building on its successful completion, the authorities seek to maintain the momentum and undertake reforms to improve the living standards of around 250 million people of Pakistan.

The Pakistani authorities look forward to continued support from the Executive Board, management, staff, and our bilateral partners.