The International Monetary Fund (IMF) confirmed on Thursday that it has reached an employee-level agreement with Pakistan on the Joint Seventh and Eighth Reviews for a $6 billion line of credit, a development that will lead to the much-awaited release of $1.17. paves the way for bn.
one in Statement On its website, the IMF said the agreement was subject to approval by its executive board.
“The IMF team has reached an employee-level agreement (SLA) with the Pakistani authorities for the conclusion of the Joint Seventh and Eighth reviews of the EFF-supported programme. The agreement is subject to approval by the IMF’s Executive Board,” statement from the IMF read.
It added: “Subject to board approval, approximately $1,177 million (SDR 894 million) will become available, bringing the total disbursements under the program to approximately $4.2 billion.”
The international moneylender said a team led by IMF mission chief Nathan Porter in Pakistan finalized discussions with Pakistan and agreed to consider extending its Extended Funded Facility (EFF) by the end of June 2023. Done, which is currently $6 billion. as well as expanding its size to $7bn by increasing it to $720m.
The decision, it explained, was taken to support the implementation of the programme, meet Pakistan’s high financing needs in the fiscal year 2022-23 and catalyze additional financing.
The announcement by the IMF comes after Finance Minister Mifta Ismail Told dawn Talks with the moneylender were over on Wednesday and “they (IMF) are now going through their internal approval process”.
An announcement from the IMF is expected soon on the successful completion of the seventh and eighth quarter reviews of the stalled loan program, he said.
Soon after the IMF confirmed the development today, Mifta shared the news on Twitter and thanked Prime Minister Shahbaz Sharif, “my fellow ministers, secretaries and especially the Finance Department for their help and efforts in achieving this agreement “.
policy preferences
In its statement released today, the IMF said that “Pakistan is at a challenging economic juncture”.
“A tough external environment coupled with increased domestic policies pushed domestic demand to volatile levels,” it said, adding that the resultant economic overheating caused large fiscal and external deficits in fiscal year 2021-22, leading to rising inflation. Contributed, and destroyed the reserved buffer. ,
In light of this, Sahukar outlined “policy priorities” for Pakistan to “stabilize and bring the economy back”. [its] Policy actions in line with the IMF supported program”.
These priorities include firm implementation of the budget for the current fiscal, reforms in the power sector, formulating a monetary policy to bring inflation down to “moderate levels”, reducing poverty and strengthening governance.
With regard to the budget for fiscal year 2022-23, the IMF noted that it aims to “reduce the government’s large borrowing needs by targeting an underlying primary surplus of 0.4 per cent of GDP (gross domestic product), which is supported by current spending restraint and Comprehensive revenue mobilization efforts are particularly focused on high income taxpayers”.
Under the new budget “development spending would be protected, and financial space would be created for the expansion of social support schemes”, adding that the provinces had agreed to support the federal government’s efforts to reach the fiscal goals. , and the Memorandum of Understanding was signed by each provincial government to this effect.
Catch up on power sector reforms. On the back of weak implementation of the already agreed plan, circular credit (CD) inflows to the power sector are expected to increase to around PRS 850 billion in FY22, overestimating program targets, threatening the viability of the power sector, and repeatedly- Bar power shortage. Officials are committed to restarting the reforms in a serious way, including delayed annual rebasing and timely adjustment of electricity tariffs including quarterly adjustments, to improve the situation in the power sector and limit load shedding.
more to follow