Pakistan gets $1.39 billion from IMF under RFI

IMF had approved a $1.386 billion funding for Pakistan to meet the urgent balance of payment needs

KARACHI (Dunya News) – State Bank of Pakistan (SBP) on Wednesday received $1.39 billion under the Rapid Financing Instrument (RFI) from the International Monetary Fund (IMF) to meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.

The announcement was made on the central bank’s twitter handle, saying “SBP has received $1.39bn under Rapid Financing Instrument by the IMF."

#SBP has received $1.39 bn under Rapid Financing Instrument by the #IMF.

— SBP (@StateBank_Pak) April 22, 2020

Last week the International Monetary Fund (IMF) had approved a $1.386 billion funding for Pakistan to meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.

The IMF approved the disbursement of $1.386 billion under the Rapid Financing Instrument in a meeting of its executive board members in Washington DC on Thursday for Pakistan to address the economic impact of the Covid-19 shock.

While uncertainty remains high, the near-term economic impact of COVID-19 is expected to be significant, giving rise to large fiscal and external financing needs. The IMF support will help to provide a backstop against the decline in international reserves and provide financing to the budget for targeted and temporary spending increases aimed at containing the pandemic and mitigating its economic impact.

The IMF remains closely engaged with the Pakistani authorities and as the impact of the COVID-19 shock subsides will resume discussions as part of the current EFF.

Following the Executive Board discussion, Geoffrey Okamoto, First Deputy Managing Director and Acting Chair in his statement said, “The outbreak of Covid-19 is having a significant impact on the Pakistani economy. The domestic containment measures, coupled with the global downturn, are severely affecting growth and straining external financing. This has created an urgent balance of payments need.

“In this context of heightened uncertainty, IMF emergency financing under the Rapid Financing Instrument provides strong support to the authorities’ emergency policy response, preserving fiscal space for essential health spending, shoring up confidence, and catalyzing additional donor support.

“In response to the crisis, the government of Pakistan has taken swift action to halt the community spread of the virus and introduced an economic stimulus package aimed at accommodating the spending needed to tackle the health emergency and supporting economic activity. Crucially, the authorities are increasing public health spending and strengthening social safety net programs to provide immediate relief to the most vulnerable. Similarly, the State Bank of Pakistan has adopted a timely set of measures, including a lowering of the policy rate and new refinancing facilities, to support liquidity and credit conditions and safeguard financial stability. In this context, the authorities’ policies should be targeted and temporary.

“As the crisis abates, the authorities’ renewed commitment to the reforms in the existing Extended Fund Facility—in particular those related to fiscal consolidation strategy, energy sector, governance, and remaining AML/CFT deficiencies—will be crucial to entrench resilience, boost Pakistan’s growth potential, and deliver broad based benefits for all Pakistanis.

“Expeditious donor support is needed to close the remaining balance of payments gap and ease the adjustment burden.”