Pakistan, IMF reach staff-level deal on reforms

Second review of Extended Fund Facility

ISLAMABAD - Pakistan and International Monetary Fund (IMF) have reached a staff-level agreement on policies and reforms needed to complete the second review of the country’s reform program supported under the Extended Fund Facility (EFF).

Ernesto Ramirez Rigo, IMF Mission Chief for Pakistan, said yesterday that following the discussions between IMF staff and the Pakistani authorities in Islamabad from February 3-13, which continued from the IMF headquarters in recent days, both the sides had reached a staff-level agreement on policies and reforms needed to complete the second review of the authorities reform program supported under the EFF. The agreement is subject to approval by the IMF management and consideration by the Executive Board, which is expected in early April. Completion of the review will enable disbursement of SDR 328 million (around US$450 million), the IMF Mission chief said in a statement issued yesterday.

It is worth mentioning here that Pakistan had so far received $1.44 billion from IMF in two tranches. The IMF in July 2019 had approved a 39-month extended arrangement under EFF for Pakistan for an amount of about $6 billion.

Earlier, on February 14, the IMF said Pakistan had made considerable progress on its programme, but a staff-level agreement could not be reached as talks on the second review of the ongoing facility. It was not clear what sticking points remained in the talks. However, it was speculated that the talks remained inconclusive due to the government’s refusal for bringing mini budget and increasing energy prices.

According to IMF, a considerable progress has been made in the last few months in advancing reforms and continuing with sound economic policies. All end-December performance criteria were met, and structural benchmarks have been completed.

The IMF said the macroeconomic outlook remains broadly as expected at the time of the first review. Economic activity has got stabilized and remains on the path of gradual recovery. The current account deficit has declined, helped by the real exchange rate that is now broadly in line with fundamentals, while international reserves continue to rebuild at a pace considerably faster than anticipated.

Inflation should start to see a declining trend as the pass-through of exchange rate depreciation has been absorbed and supply-side constraints appear to be temporary. Fiscal performance in the first half of the fiscal year remained strong, with the general government registering a primary surplus of 0.7 percent of GDP on the back of strong domestic tax revenue growth.

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