–IMF will review Pakistan’s performance quarterly over 39 months, phasing release of the additional aid over time
–Spokesperson says Fund has released $1bn to Pakistan immediately
ISLAMABAD: The executive board of the International Monetary Fund (IMF) on Wednesday approved a three-year bailout package worth $6 billion for Pakistan in a bid to revive “sustainable growth to the country’s economy and improve the standards of living”.
The decision was announced by the Fund’s spokesperson, Gerry Rice, on Twitter.
The IMF board released $1 billion to Pakistan immediately and said in a statement that the programme aims to “support the authorities’ economic reform program” and to help “reduce economic vulnerabilities and generate sustainable and balanced growth.”
The fund will review Pakistan’s performance quarterly over 39 months, phasing release of the additional aid over time.
Islamabad will receive $2bn annually under an extended fund facility (EFF).
According to the IMF, “The EFF provides assistance in support of comprehensive programs that include policies of the scope and character required to correct structural imbalances over an extended period.”
The development was also shared by PM’s Adviser on Finance Abdul Hafeez Shaikh on his twitter handle.
“IMF Board approved a $6 billion Extended Fund Facility (EFF) for Pakistan to support our economic reform program. Our program supports broad-based growth by reducing imbalances in the economy. Social spending has been strengthened to completely protect vulnerable segments,” the adviser tweeted.
Pakistan and IMF had finalised the bailout package after months-long talks pertaining to the size of the bailout package in May this year.
“The Fund aims to support the authorities’ ambitious macroeconomic and structural reform agenda during the next three years. This includes improving public finances and reducing public debt through tax policy and administrative reforms to strengthen revenue mobilization and ensure a more equal and transparent distribution of the tax burden. At the same time, a comprehensive plan for cost-recovery in the energy sectors and state-owned enterprises will help eliminate or reduce the quasi-fiscal deficit that drains scarce government resources,” the Fund’s statement had said at the time of the staff-level agreement.
The government agreed under the programme to increase energy prices, generate more taxes, introduce a market-determined exchange rate, allow central bank’s full operational independence and focus on inflation instead of growth. Also, the provinces would have to create more cash surpluses to support federal governments’ fiscal stability.
Pakistan will remain committed throughout the 39-month programme period to what the State Bank calls a “market-determined exchange rate”.
However, if at any stage the central bank comes across reasonable evidence to suggest artificial exchange rate manipulation by outside factors, it will be free to intervene.
It may be noted that the rupee has been one of the worst performing currencies in Asia. Last week it fell 7.2 rupees to 164 against the greenback. The currency had lost 35 per cent of its value against the dollar in the last year.
The current budget passed by the government was dubbed as the ‘IMF-dictated’ by the opposition parties.
It is worth mentioning here that back in 2013, soon after coming to power, the Pakistan Muslim League-Nawaz (PML-N) government signed a $6.6 billion bailout programme with IMF under the extended fund facility for a period of three years.