The short-term $3 billion Standby Arrangement (SBA) program with the IMF is facing increased risks due to the possibility of an extension in the tenure of the caretaker setup in Pakistan. This extension is expected because of the delimitation exercise required after the approval and notification of the 7th Population and Housing Census. Delimitation will take four months, and the election process will require an additional two months, potentially leading to a delay in elections and an extension of the caretaker regime for up to six months.
Meanwhile, the Cabinet Committee on Energy (CCOE) has approved a revised Circular Debt Management Plan (CDMP) which, upon federal cabinet approval, will be shared with the IMF. The revised CDMP aims to manage circular debt by implementing timely tariff adjustments and fuel adjustments, while eliminating untargeted subsidies.
The SBA program was designed to be completed during the tenures of three different governments. The first installment was released during the Pakistan Democratic Movement (PDM)-led regime. The first review of the program was expected in October 2023, with a possible second tranche approval in December 2023 if targets were met. However, the extension of the caretaker setup may lead to strict monitoring and responsibility for achieving program targets falling on the caretaker government.
Full implementation of the SBA program is crucial for graduating from the ongoing program and qualifying for another medium-term program beyond March/April 2024 to address Pakistan’s vulnerabilities in repaying external loans.