The State Bank of Pakistan (SBP) Tuesday received $506 million from the International Monetary Fund (IMF) under 36-month Extended Fund Facility (EFF), said spokesman of the State Bank of Pakistan.
The reserves of the country surged to a record high of above $18.85 billion after receiving this payment from the IMF. The executive board meeting of the IMF on June 26 granted final approval to the tranche.
On September 4, 2013, the executive board approved the three-year extended arrangement under the EFF in the amount of SDR 4.393 billion (about US$6.18 billion, or 425 percent of Pakistan’s quota at the IMF).
On satisfaction over the country’s progress, Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair of IMF, said, “Progress towards macroeconomic stabilization is encouraging, thanks to strong performance under the programme and despite significant legal, political, and security challenges. Macro-economic imbalances are being gradually addressed. Building on these gains, continued efforts are needed to make the economic reform more sustainable and boost inclusive growth.”
The planned fiscal adjustment in the context of the 2015/16 budget is appropriate, the IMF chief said, adding the authorities’ plans to broaden the tax base, including eliminating tax exemptions and concessions, are welcome, though significant scope remains for increasing tax compliance and enforcement.
The authorities are implementing plans to reduce costly and inefficient electricity subsidies, and steps are being taken to contain arrears in the electricity sector, while boosting support for the most vulnerable. Legal challenges might still pose risks to the authorities’ efforts, and their commitment to contingency measures is encouraging. Building on recent success in diversifying budgetary financing and reducing the reliance on central bank financing, continued strengthening of public debt management remains a priority, the IMF said.
Following the planned amendments to the central bank law that will already address some important shortcomings to central bank independence, further efforts will be needed to bolster the SBP’s governance structure and autonomy. Building on the recently started implementation of the improved interest rate corridor, efforts to strengthen central bank operations should continue, including through strengthened risk management and internal operations.
Moody’s Investors Services has declared China-Pakistan Economic Corridor as “credit positive” for the country because “it will spur investment activity, boost bilateral trade flows and help ease the country’s growing energy shortages”.