IMF Acknowledges Pakistan’s Response Against Coronavirus

The IMF has acknowledged the relief package of Rs. 1.2 trillion which was announced by the Pakistan government and stated that COVID-19 has been spreading rapidly in the country.

In its new publication Policy Tracker, the fund stated that both the federal and provincial governments have implemented a range of measures to delay and contain the spread of the virus.

This policy tracker summarizes the key economic responses governments are taking to limit the human and economic impact of the COVID-19 pandemic. The tracker includes 193 economies.

These included quarantining more than three thousand travelers from Iran, closing borders with neighboring countries, international travel restrictions, school closures, social distancing measures, and lockdowns in cities and provinces across the country. Pakistan army troops were deployed starting Monday, March 23, to help provincial governments in their measures to contain the spread of the virus.


IMF noted that a relief package worth Rs. 1.2 trillion has been announced by the authorities on March 24, 2020. The fund noted:

  • Elimination of the import duties on imports of emergency health equipment.
  • Relief to daily wage workers worth Rs. 200 billion with cash transfers to low-income families worth Rs. 150 billion.
  • Accelerated tax refunds to the export industry worth Rs. 100 billion.
  • Financial support to SMEs worth Rs. 100 billion.
  • The economic package also earmarked resources for accelerated procurement of wheat Rs. 280 billion.
  • Rs. 50 billion financial support to the utility stores.
  • Rs. 70 billion relief in fuel prices.
  • Rs 110 billion for electricity bill payments relief.
  • Rs. 15 billion support for health and food supplies.
  • Rs. 100 billion emergency contingency fund.
  • A transfer of Rs. 25 billion to the National Disaster Management Authority (NDMA) for the purchase of necessary equipment to deal with the pandemic.

Monetary and Macro-Financial

On the monetary and macro-financial side, the State Bank of Pakistan (SBP) has responded to the crisis by cutting the policy rate twice by a cumulative 225 basis points to 11.0 percent in less than two weeks in March 2020.

The IMF noted that on March 17, SBP announced two new refinancing facilities:

‘Temporary Economic Refinancing Facility’ (TERF) worth Rs. 100 billion in bank refinancing to stimulate investment in new manufacturing plants and machinery at 7 percent fixed for 10 years and the “Refinance Facility for Combating COVID–19” (RFCC) worth Rs. 5 billion to support hospitals and medical centers the purchase of equipment to detect, contain, and treat COVID-19.

Regulatory Measures to Maintain The Banking System

The fund noted that SBP has taken temporary regulatory measures to maintain banking system soundness and sustain economic activity. These include:

  • Reducing the capital conservation buffer by 100 basis points to 1.5 percent.
  • Increase the regulatory limit on the extension of credit to SMEs by 44 percent to Rs 180 million.
  • Relaxation of the debt burden ratio for consumer loans from 50 percent to 60 percent.
  • Allowed banks to defer clients’ payment of principal on loan obligations by one year.
  • Relaxation of regulatory criteria for restructured/rescheduled loans for borrowers who require relief beyond the extension of principal repayment for one year.

  • While the State Bank of Pakistan (SBP) has financially facilitated the banks and other institutions functioning under her regulatory umbrella, the Securities & Exchange Commission of Pakistan (SECP) has no financial muscles to replicate SBP’s relaxations for Non-Banking Finance Companies (NBFCs) regulated by the SECP. All that has been done is to encourage NBFCs to allow a deferment on payment of the Principal Amount of liabilities owed to them by their borrowing customers. SECP has not thought about the liquidity crunch that the NBFCs are likely to face as a result of the deferment of such repayments. About time SBP comes to the aid of NBFCs for refinancing their depleting liquidity.

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