Pakistan, IMF reach agreement to complete overhaul of recovery assistance package for $ 6 billion loan


The IMF, in a bailout in 2019, pledged to provide support under the Extended Financing Facility (EFF) when the Pakistani economy was in a critical phase and was in urgent need of assistance to meet the balance of payments challenge.

Cash-strapped Pakistan and the International Monetary Fund (IMF) reach a staff-level deal to complete the sixth review of an aid package needed to bring the $ 6 billion program back to a standstill .

The IMF, in a bailout in 2019, pledged to provide support under the Extended Financing Facility (EFF) when the Pakistani economy was in a critical phase and was in urgent need of assistance to meet the balance of payments challenge.

The sixth review of the facility has been on hold since April and with it the lending facility, creating doubts in the minds of investors.

The IMF said in a statement Monday that the staff level agreement is subject to the approval of the Executive Board, after the implementation of prior actions, including on fiscal and institutional reforms.

“Available data suggests that a strong economic recovery has taken hold, benefiting from the authorities’ multifaceted policy response to the COVID-19 pandemic which has helped contain its human and macroeconomic ramifications,” the IMF said.

Approval of the deal will make available 750 million special drawing rights (SDRs), equivalent to $ 1,059 million, he said.

The SDR is a basket of mixed currencies made available to IMF member countries.

In its statement following discussions with Pakistani officials, the IMF acknowledged the country’s progress in implementing the program, “despite a difficult environment.”

The IMF also acknowledged Pakistan’s progress in improving its anti-money laundering and terrorist financing (AML / CFT) regime, but said more time was needed to strengthen its effectiveness.

He predicted that Pakistan’s economic growth rate would reach or exceed 4% in the current fiscal year and 4.5% in fiscal 23, adding that discussions with Pakistani officials also focused on policies aimed at achieving sustainable and resilient growth.

Restoring the program will bring over $ 1 billion to Pakistan, which will unlock around $ 3 billion over two years.

This is much less than what had been agreed in May 2019 if the program had not derailed first in January 2020 and then in June of this year.

In July 2019, Pakistan and the IMF had signed a 39-month EFF for $ 6 billion, but the program was largely overdue, resulting in disbursements of only $ 2 billion in two years.

Sixth review talks focus on disbursing the next tranche of the $ 1 billion loan, but it looks like both sides still have a lot of ground to cover despite holding two rounds, the first in June and then the second. this month.

Pakistan has already accepted two IMF conditions. It increased electricity prices by 1.68 yen per unit or up to 14% and also raised the prices of petroleum products to the new all-time high of 137.79 yen per liter.

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