ISLAMABAD – The International Monetary Fund (IMF) and Pakistan finallyreached a staff-level agreement under the $6 billion Extended Fund Facility(EFF).
Reports in local media said the global lender agreed to revive a $6billion bailoutpackagelinkforthe South Asian country – providing a major relief to the strugglingeconomy.
The agreement involves the implementation of prior actions, notably onfiscal and institutional reforms, before approval from the IMF’s executiveboard, the statement reads.
Both sides evolve consensus on taking needed steps for completion ofpending sixth review of the economy, laying the foundation for approval ofnew legislation by the Parliament. The agreement was finalized afterprolonged talks spanning over six months.
The statement issued by IMF further stated “Completion of the review wouldmake available about US$1,059 million, bringing total disbursements underthe EFF to about US$3,027 million and helping unlock significant fundingfrom bilateral and multilateral partners”.
The South Asian country is still only halfway to securing the $1 billionloan, as the IMF’s Executive Board approval is linked with theimplementation of pre-conditions.
Islamabad will be required to launch a mini-budget to meet anotherpre-requisite on achieving primary surplus. PTI government will also haveto get the State Bank of Pakistan amendment Bill 2021 passed from theParliament.
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IMF stated that the external pressures have started to emerge and inflationremains high, the weakest points that will now require tough actions onpart of Pakistan.
“Notable achievements on the structural front include the finalization ofthe National Socio-Economic Registry (NSER) update, parliamentary adoptionof the National Electric Power Regulatory Authority (NEPRA) Act Amendments,notification of all pending quarterly power tariff adjustments, and paymentof the first tranche of outstanding arrears to independent power producers(IPPs) to unlock lower capacity payments fixed in renegotiated powerpurchase agreements (PPAs),” IMF statement further added.
Meanwhile, authorities also made progress in improving steps against moneylaundering and combating the financing of terrorism framework, althoughsome additional time is needed to strengthen its effectiveness.
On the other hand, the Federal Board of Revenue’s tax revenue collectionhas been sturdy. At the same time, external pressures have started toemerge: a widening of the current account deficit and depreciationpressures on the exchange rate.
Officials also considering to introduce a package of fiscal measurestargeting a small reduction of the primary deficit with respect to the lastfiscal year.
