IMF Country Report Highlights- July 2023

Research Team

Table of Contents

IMF Country Report Highlights – Pakistan

Higher Interest Rates, Floating Exchange Rate, Power Sector Reforms

The IMF issued its latest country report on Pakistan with details of the latest 9-month standby agreement of USD 3bn.

Key Takeaways

● IMF staff have emphasized that SBP will have to continue monetary tightening to reduce inflation expectations and expect inflation to persist on the back of exchange rate adjustments during the year. Massive injections through Open Market Operations to keep interest rates in check resulted in loose monetary conditions. To recall, total OMO exposure increased from PKR 4trn at the end of June to 2023 to approximately PKR 8trn currently.
● Return to a market-based exchange rate and a permanent ending of administrative controls would allow the exchange rate to act as a shock absorber. Moreover, the ending of administrative controls which have caused major disruptions especially in the auto and appliance sector would allow these companies to operate smoothly. To recall, administrative measures in one form or the other have negatively impacted the operations of companies since May 2022. The SBP has recently withdrawn a circular issued to banks to prioritize certain imports.
● Power sector reforms remain in focus and staff has stressed timely and regular tariff adjustments to recover costs along with better targeting of power subsidies. The increased focus and steps taken to secure the program on resolution of circular debt would lead to better cash flows for companies in the energy chain and lead to higher dividends.
● While Pakistan’s public debt is assessed as sustainable, the situation could quickly worsen if implementation of policies agreed to secure the SBA are not continued. We do not see the risk of any local debt restructuring at the moment. The IMF has also reduced its estimate for gross external financing needs on the back of a lower Current Account Deficit (CAD) target. The IMF expects public debt as a percentage of GDP to gradually decline to 63.1% by 2028 from 77.4% in 2023.
● Pakistan is highly vulnerable to natural disasters due to its diverse climates and topography. Climate change has intensified these disasters, particularly hydrologicalevents, resulting in significant human and material losses. To address this, Pakistan needs to prioritize climate resilience alongside mitigation efforts. Climate models predict that Pakistan’s weather patterns will become more extreme, with higher temperatures and variable precipitation. Accelerated adaptation measures are crucial, as the country faces the risk of losing Himalayan ice and increased water flow.

Important Disclosures


This report has been prepared by Chase Securities Pakistan (Private) Limited and is provided for information purposes only. Under no circumstances, this is to be used or considered as an offer to sell or solicitation or any offer to buy. While reasonable care has been taken to ensure that the information contained in this report is not untrue or misleading at the time of its publication, Chase Securities makes no representation as to its accuracy or completeness and it should not be relied upon as such. From time to time, Chase Securities and/or any of its officers or directors may, as permitted by applicable laws, have a position, or otherwise be interested in any transaction, in any securities directly or indirectly subject of this report Chase Securities as a firm may have business relationships, including investment banking relationships with the companies referred to in this report This report is provided only for the information of professional advisers who are expected to make their own investment decisions without undue reliance on this report and Chase Securities accepts no responsibility whatsoever for any direct or indirect consequential loss arising from any use of this report or its contents At the same time, it should be noted that investments in capital markets are also subject to market risks This report may not be reproduced, distributed or published by any recipient for any purpose.

Analyst certification:

The research analyst for this report certifies that 1.all of the views expressed in this report accurately reflect her personal views about the subject and part of any of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst in this report.

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