The International Monetary Fund has released its 2024 Extended Fund Facility report, detailing the challenges and structural reforms tied to Pakistan’s $7 billion loan. The report highlights the country’s fragile economic condition, risks tied to soaring debt, delays in privatizing key state-owned enterprises, and outlines 22 structural benchmarks the government must follow to keep the program on track.   1. Debt Sustainability and Sovereign StressThe IMF paints a worrying picture of Pakistan’s debt situation, with elevated public debt and gross financing needs posing serious risks to long-term stability.      The high risk of sovereign stress is exacerbated by low foreign reserves, which remain precariously low despite external financing from multilateral and bilateral partners. However, the IMF notes that debt is expected to decline gradually over the medium term with continuous fiscal consolidation efforts.   2.  Privatization Delays and Missed Targets.   The IMF expressed concern over the delays in privatizing key SOEs such as Pakistan International Airlines (PIA) and the Faisalabad Electric Supply Company. Privatizing profitable SOEs remains a top priority for the government to attract foreign investment and reduce the state’s financial burden.     3. Energy Sector Reforms: DISCOs Privatization on Track.     The government’s plan to sell off two DISCOs by January 2025 is progressing, but the IMF stresses the need for urgent reforms in the energy sector. It emphasizes that inefficiencies and losses in energy distribution must be tackled through updating tariff guidelines, managing employee concerns, and engaging in a public communication campaign.   4. Security and Business Environment Risks.   The report highlights the challenging security environment in Pakistan, which is undermining efforts to attract Foreign Direct Investment. 5. Fiscal Policy Adjustments and External Financing Needs.   The IMF report underscores the critical need for fiscal adjustments to reduce Pakistan’s growing budget deficit. The government has secured $16.8 billion in short-term financing rollovers and $2.1 billion in new commitments from key partners such as China, Saudi Arabia, and the Asian Development Bank (ADB).     https://www.imf.org/en/Publications/CR/Issues/2024/10/10/Pakistan-2024-Article-IV-Consultation-and-Request-for-an-Extended-Arrangement-under-the-556152  (ICE ISLAMABAD)

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