The International Monetary Fund (IMF) has agreed to release its next tranche of $500 million for Pakistan. The announcement has come after the IMF Executive Board completed the combined second through fifth reviews of the Extended Arrangement under the Extended Fund Facility (EFF) for Pakistan, a statement issued by the IMF said.
“Program performance has remained satisfactory notwithstanding the unprecedented challenges of the Covid-19 shock, and the authorities’ policies have been critical in supporting the economy and saving lives and livelihoods,” said the statement, adding, “The Pakistani authorities remain committed to ambitious policy actions and structural reforms to strengthen economic resilience, advance sustainable growth, and achieve the economic reform program medium-term objectives”.
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The release of this tranche is part of the revival of the $6 billion program that was suspended in April 2020 after Pakistan failed to bring a mini-budget for the readjusting of the economy.
Pakistan has had to fulfill certain stringent conditions for the revival of this program and to stabilize the economy. Some of the tough developments that had to be made for the recommencement of this program included a significant increase in the power tariff, the imposition of taxes worth Rs. 140 billion, and reforms for the central bank providing unprecedented autonomy to the State Bank of Pakistan (SBP).
The statement issued by the IMF acknowledged this, and said, “The Pakistani authorities have continued to make satisfactory progress under the Fund-supported program, which has been an important policy anchor during an unprecedented period. While the Covid-19 pandemic continues to pose challenges, the authorities’ policies have been critical in supporting the economy and saving lives and livelihoods. The authorities have also continued to advance their reform agenda in key areas, including on consolidating central bank autonomy, reforming corporate taxation, bolstering management of state-owned enterprises, and improving cost recovery and regulation in the power sector”.
The IMF also outlined further measures that Pakistan will have to take in the near future. The statement said, “Going forward, further sustained efforts, including broadening the revenue base carefully managing spending and securing provincial contributions, will help achieve a lasting improvement in public finances and place debt on a downward path”.
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The executive board of the IMF endorsed the staff-level agreement reached between itself and Pakistan in February. With the disbursement of the current installment of the program, the total disbursement from the IMF will reach $2 billion out of the total of $6 billion.
This 39-month EFF arrangement for Pakistan was approved by the Executive Board on July 3, 2019 for $6 billion at the time of approval of the arrangement. The program aims to support Pakistan’s policies to help the economy and save lives and livelihoods amid the still unfolding Covid-19 pandemic, ensure macroeconomic and debt sustainability, and advance structural reforms to lay the foundations for strong, job-rich, and long-lasting growth that benefits all Pakistanis.
