ISLAMABAD (our reporter):- The Executive Board of the International Monetary Fund (IMF) has approved the resumption of its $6 billion Extended Fund Facility (EFF) program for Pakistan.

The executive board, which convened in Washington, also agreed to relax a few requirements to allow the fourth loan tranche to be released under the $6 billion Extended Fund Facility’s sixth review.

Now completed, the global lender will sign off to make available SDR 750 million (about $1,059 million) for Pakistan, bringing total disbursements under the EFF to about $3,027 million. Prior to this engagement, Pakistan and IMF had reached a staff-level agreement on policies and reforms needed to complete the sixth review under the $6 billion EFF and issued a press statement on November 21, 2021.

Notably, Pakistan committed to undertake measures including spending cuts and the implementation of around Rs. 500 billion in taxes, including a Rs. 20 per liter gasoline tax.

The IMF, in its press statement after the board meeting, also noted that strong efforts to advance electricity sector reform are needed to restore the sector’s financial viability and address adverse spillovers on the budget, financial sector, and real economy. The Fund has warned that the Pakistani economy has continued to recover despite the challenges from the COVID-19 pandemic, but imbalances have widened, and risks remain elevated.

The Executive Board of the International Monetary Fund (IMF) concluded the 2021 Article IV Consultation with Pakistan. The Executive Board also completed the sixth review under the Extended Fund Facility (EFF) for Pakistan, allowing the authorities to draw the equivalent of SDR 750 million (about $1 billion). This brings total purchases for budget support under the program to SDR 2,144 million (about $3 billion, or 106 percent of quota).

The EFF was approved by the Executive Board on 3 July 2019 for SDR 4,268 million (about $6 billion at the time of approval, or 210 percent of quota). The program aims to support Pakistan’s policies to help the economic recovery from the 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.

Pakistan entered the COVID-19 pandemic with strengthened buffers, following the approved EFF program. A strong economic recovery has gained hold since summer 2020, benefiting from the authorities’ multifaceted policy response to the unprecedented shock.

At the same time, external pressures also started to emerge in 2021, including a widening current account deficit and depreciation pressures on the exchange rate, which also reinforced domestic price pressures. The recent policy adjustment was appropriate to address these challenges and maintain economic stability.

By adminmy

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