Cash-strapped Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement to complete the sixth review of an assistance package needed to restore the stalled $ 6 billion programme.
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The IMF, in a bailout package in 2019, pledged to provide the support under Extended Fund Facility (EFF) when Pakistan’s economy was in a critical stage and badly needed assistance to meet the balance of payment challenge.
The sixth review of the facility has been in recess since April and with it the loan facility, creating doubts in the mind of investors.
The IMF announced in a statement on Monday that staff-level understanding is subject to approval by the Executive Board, following the implementation of prior actions, notably on fiscal and institutional reforms.
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"Available data suggests that a strong economic recovery has gained hold, benefiting from the authorities' multifaceted policy response to the COVID-19 pandemic that has helped contain its human and macroeconomic ramifications," the IMF said.
The approval of the agreement will make available 750 million in Special Drawing Rights (SDR), equivalent to $1,059 million, it said.
The SDR is a basket of mixed currencies made available to member countries of the IMF.
In its statement following discussions with Pakistani officials, the IMF acknowledged the country's progress in implementing the programme, "despite a difficult environment".
The IMF also acknowledged Pakistan's progress in improving its anti-money laundering and combatting the financing of terrorism (AML/CFT) regime but it said that the additional time was needed to strengthen its effectiveness.
It predicted that Pakistan's economic growth rate would reach or go beyond 4% in the current fiscal year and 4.5% in fiscal year 23, adding that talks with Pakistan officials also focused on policies to achieve sustainable and resilient growth.
The restoration of the programme will provide over $ 1 billion to Pakistan, leading to release of about $ 3 billion in over two years.
It is far less than what had been agreed in May 2019 if the programme had not been derailed first in January 2020 and then in June this year.
In July 2019, Pakistan and the IMF had signed a 39-month EFF for $ 6 billion but the programme remained largely off track, resulting in disbursements of only $ 2 billion in two years.
The 6th review talks are for the disbursement of the next loan tranche of $ 1 billion but it seems that both sides still have to cover a lot of ground despite holding two rounds, first in June and then second this month.
Pakistan has already accepted two conditions of the IMF. It has increased the electricity prices by ₹1.68 per unit or up to 14 % and also jacked up the petroleum products prices to the new historical level of ₹137.79 per litre.