IMF likely to approve about $453 million for Pakistan tomorrow
According to the IMF's website, the board will review Pakistan's economic growth.
WASHINGTON (Dunya News) – The International Monetary Fund (IMF) in Washington tomorrow will hold its board meeting for considering an approval of the disbursement of second tranche of about $453 million to Pakistan under the $6 billion Extended Fund Facility (EFF) finalised in May this year. According to the IMF’s website, the board will review Pakistan’s economic growth.
On Nov. 8, the IMF stated that Pakistan’s fiscal deficits were narrowing, and announced it would release the second tranche of its $6 billion financial assistance program to the country.
“Completion of the review will enable disbursement of SDR 328 million (or around $450 million) and will help unlock significant funding from bilateral and multilateral partners,” Ramirez Rigo, head of an IMF mission to Islamabad, had said in a statement after the mission completed its first review of its program.
“The government policies have started to bear fruit, helping to reserve the buildup of vulnerabilities and restore economic stability. The external and fiscal deficits are narrowing, inflation is expected to decline and growth although slow, remains positive,” the IMF statement said.
The IMF had held meetings with Federal Bureau of Revenue (FBR) Chairman Shabbar Zaidi and Advisor to the Prime Minister on Finance Abdul Hafeez Sheikh.
Under the fund programme, the IMF mission had reviewed Pakistan’s performance against six performance criteria related to Net International Reserves (NIR), Net Domestic Assets (NDA), net foreign currency swap position, primary budget deficit target, net government borrowing from the central bank and stock of sovereign guarantees issued by the government.
In addition, there were two continuous performance criteria including zero new credit to the government by the SBP and on accumulation of external public payment arrears. On top of that, the authorities’ performance was also reviewed on five indicative targets including disbursements under BISP, government spending on health and education, tax collections, payment of tax refunds and a freeze on power sector’s circular debt.
The mission was in Islamabad from Oct. 28 to Nov. 8.
The IMF said Pakistan’s near-term economic outlook was broadly unchanged from the time of the program approval in April, with gradually strengthening activity and average inflation expected to decelerate in the 2020 fiscal year. However, domestic and international risks remain, and structural economic challenges persist, it had stated.
“Positive for Pakistan! IMF Mission concludes successfully. IMF confirms that Pakistan met all First Quarter Performance Criteria by good margins and economy continuing to get better. Thank you PM and entire team!,” Dr Abdul Hafeez Shaikh, finance adviser to the prime minister had said in a tweet on the night of Nov. 8.
Pakistan has lifted interest rates over the past year to tame high inflation, which eased to 11.04% in October from 11.37% in September.
The IMF had disbursed in July this year about $991 million on completion of all prior actions committed by Pakistan before signing the fund programme.
According to the signed agreement in July this year, Pakistan will get $2 billion annually, under the EFF, for the period of three years. The amount is supposed to help Pakistan stabilise its crippling state of economy and recover from fiscal debt and inflation.
On Oct. 21, the IMF and the World Bank Group had expressed support for Pakistan’s economy, while the global funds had also appreciated the economic reforms of the country.
The assurances were given by the managing directors of the IMF and the Work Bank during separate meetings with Sheikh in Washington, Radio Pakistan had reported.
During a meeting, Mr Shaikh and his delegation had held an extensive session with the IMF Managing Director Ms Krsitalina Georgieva and other senior fund officials.
The finance adviser had given an overview of the implementation of the IMF program in Pakistan. He stated that the first quarter results indicated that Pakistan’s economy was on its path to stabilisation. “The reforms initiated under the IMF program were demonstrating positive outcomes.”
Ms Georgieva had stated that the IMF recognised that tough decisions were being made and implemented to stabilise Pakistan’s economy. She had appreciated the commitment of the government and assured continued support of the IMF for the reform process.
Foreign exchange reserves swell to nine-month high
Meanwhile, Pakistan’s foreign exchange reserves have risen to nine-month high of $17.29 billion as the State Bank of Pakistan (SBP) received $1.3 billion from the Asian Development Bank (ADB).
The central bank’s reserves have expanded to $10.41 billion, whereas the reserves of commercial banks are $6.88 billion.
In the current financial year, foreign exchange reserves have increased by $3.10 billion.
Financial experts are of the view that despite the country’s foreign exchange have swelled, but that still does not meet the standards of the IMF, which considers that the reserves of any country should be equal to imports for at least three months.
The Asian Development Bank (ADB) and Pakistan on Monday struck a loan agreement of $1.3 billion for budgetary support and reforms of the country. This will help stabilise the foreign exchange reserves of the country, and strengthen Pakistan’s slowing economy.
Under the agreement, the ADB has committed to providing $1 billion towards the Economic Stabilisation Programme which aims to improve exchange rate management, strengthen public financial management, restore allocative efficiency of scarce public resources and reduce the social impacts of macroeconomic stability measures, said the press release.
Out of the total $1.3 billion loan, $300 million have been earmarked for reforms in the energy sector and the Financial Stability Programme. This aims to address energy shortfalls as well as policy related shortcomings in the country’s energy sector.
Besides, the ADB has forecasted Pakistan’s economic growth rate to stabilise this fiscal year FY2020.
The ADB has released its Asian Development Outlook 2019 Update, and it observed that “Despite tight monetary policy and a modestly strengthening currency, inflation in Pakistan averaged 10.1% in the first 3 months of FY2020.”
“Following a steep growth slowdown in Pakistan to 3.3% in FY2019 (ended 30 June 2019), signs of economic stabilisation are emerging in FY2020, as forecast in the Update,” it considered.
