No free lunch: Pakistan's economy resurges with IMF support, reform commitments

July 04, 2023 (MLN): Pakistan's economy, which was once on the verge of collapse, has suddenly started enjoying a series of fortunate events, including PSX's bull run with the biggest gain in 15 years on Monday, dollar bonds have surged, Barclays Plc upgraded its rating on Pakistan's dollar bonds to market weight and PKR’s appreciation by 14 rupees per USD.

All of this has materialized due to the green light from the International Monetary Fund (IMF) regarding the long-stalled Staff Level Agreement (SLA) worth $3 billion on Friday but one must remember that there is no free lunch.

According to well-informed sources, in a bid to secure the much-needed financial assistance from the fund, the government has made a series of pledges that underline its commitment to implementing wide-ranging reforms and maintaining fiscal discipline.

The government has committed that no amnesty schemes will be offered for a duration of nine months, signaling the authorities' determination to bolster tax revenues.

Meanwhile, the government has pledged to implement financial discipline measures to ensure the efficient use of public funds and improve overall economic stability.

Addressing the long-standing issue of energy, the government has vowed to undertake inclusive energy reforms.

Furthermore, the government has taken a significant step by allowing the market to determine the exchange rate. In addition, the import restrictions will be lifted too in order to stimulate economic growth.

To maintain the confidence of international stakeholders and fostering a positive investment climate, the government has reassured lending countries and institutions of its determination to implement the agreed-upon assurances.

Recognizing the importance of foreign exchange reserves, the government has emphasized the application of measures to increase these reserves.

Lastly, the government has pledged to introduce much-needed reforms in an effort to improve the efficiency and effectiveness of state institutions.

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