Executive board approves completion of combined 7th, 8th review for $1.16b n After approval, Islamabad will be able to get lo
ISLAMABAD - The International Monetary Fund (IMF) on Monday finally revived its loan programme for Pakistan after approving the much needed $1.16 billion, which would pave the way for getting loans from other multilateral and bilateral sources.
The Executive Board of the IMF has approved completion of the combined 7th and 8th review under the EFF and release of the tranche of SDR 894 million ($1.16 billion). The completion of review will help catalyze crucial external financing from multilateral and bilateral development partners. The Board also approved the extension of the program through end-June 2023, and augmentation of access by SDR 720 million ($934m) increasing the total program size to SDR 4,988 million equivalent to 245.6 percent of the quota.
The IMF Board expressed deepest condolences and sympathies with Pakistani authorities over the tragic loss of lives and livelihoods caused by the floods in Pakistan. The Executive Board welcomed the authorities’ recent efforts to bring the program back on track and renewed commitment to program policies and targets.
Prime Minister Shehbaz Sharif has declared the revival of the IMF programme a positive development for the economy of Pakistan.
In a statement, he said restoration of the IMF progr mme ended the risk of economic default of Pakistan.
“Thanks to Allah, Pakistan emerged successfully out of a difficult economic challenge,” he said, adding the IMF programme was a phase and destination of Pakistan was economic self-sufficiency.
He praised Minister for Finance Miftah Ismail and his team for the revival of the financial programme. Finance Minister Miftah Ismail has expressed satisfaction over the approval. “Alhamdolillah the IMF Board has approved the revival of our EFF program. We should now be getting the 7th & 8th tranches of $1.17 billion,” said the Finance Minister on twitter. He thanked the Prime Minister Shehbaz Sharif for taking so many tough decisions and saving Pakistan from default. “I congratulate the nation” he added.
The Ministry of Finance is expecting to receive the loan tranche within the current week. The much needed inflow of tranche would build the country’s foreign exchange reserves as well as improving the value of local currency. It would also open venues for receiving loans from other multilateral and bilateral sources during the current fiscal year. Foreign reserves held by the State Bank of Pakistan has recently declined to US$7.809 billion — covering six to seven weeks imports of the country.
Just three days before IMF’s Executive Board meeting, the deal had once again come ‘under suspicion’ after Khayber Pakhtunkhawa announced to backtrack from the already signed MoU with the center for generating a revenue surplus during current fiscal year. However, the IMF has approved the loan tranche.
Pakistan had entered into the IMF programme in 2019. The government had so far received $3 billion from the IMF. The IMF deal was suspended in March this year when former Prime Minister Imran Khan had announced subsidy on electricity and petroleum products prices and tax amnesty scheme for the industrialists. He announced massive subsidy at the time of no-confidence move against him. However, later, the coalition government had taken tough decisions for reviving the IMF loan programme including increasing prices of petroleum products by up to around Rs120 per liter, imposing higher petroleum levy on oil products, enhancing power tariff and increasing tax burden on the salaried class. On July 14, 2022, Pakistan and the IMF had finally reached the staff-level agreement. The revival of IMF programme would also pave way for getting loans from the other international lenders. Pakistan is expecting to receive around $11.5 billion from friendly countries and international financial institutions during the current fiscal year. Pakistan would receive $6.5 billion from multilateral sources in current fiscal year. Around $3.5 billion inflow is expected from Asian Development Bank (ADB), $2.5 billion from the World Bank, $500 million Asian Infrastructure Investment Bank and some from Islamic Development Bank during the ongoing financial year following the deal with the IMF.
The government has also arranged $5 billion financing from the friendly countries. Qatar would invest $3 billion, Saudi Arabia has also announced to invest $1 billion and United Arab Emirates would invest $1 billion in Pakistan. Saudi Arabia might also provide oil worth one billion dollars on deferred payment. Following the Executive Board’s discussion on Pakistan, Ms. Antoinette Sayeh, Deputy Managing Director and Acting Chair, issued the following statement:
“Pakistan’s economy has been buffeted by adverse external conditions, due to spillovers from the war in Ukraine, and domestic challenges, including from accommodative policies that resulted in uneven and unbalanced growth. Steadfast implementation of corrective policies and reforms remain essential to regain macroeconomic stability, address imbalances and lay the foundation for inclusive and sustainable growth.
“The authorities’ plan to achieve a small primary surplus in FY2023 is a welcome step to reduce fiscal and external pressures and build confidence. Containing current spending and mobilizing tax revenues are critical to create space for much-needed social protection and strengthen public debt sustainability
ans from other world lenders n Loan approval to bring prosperity in country: PM