IMF approves $498 million for Pakistan


Pakistan has received $4.98b of the total $6.64b promised over 36 months

IMF presents optimistic pictures of economy’s health

Says sustained efforts are needed to further improve the monetary policy framework, reduce fiscal dominance, and strengthen central bank independence

The Executive Board of the International Monetary Fund (IMF) on Friday completed the ninth review of Pakistan’s economic performance under a 36-month program supported by an Extended Fund Facility (EFF) arrangement.

The Executive Board’s decision enables the immediate disbursement of $498.1 million, bringing total disbursements to $4.98 billion.

On September 4, 2013, the Executive Board approved the three-year extended arrangement under the EFF in the amount of about $6.64 billion.

In completing the review, the Executive Board also approved the authorities’ request for waivers of non-observance of the end-September 2015 performance criteria on the ceiling on overall budget deficit and the ceiling on net domestic assets of the State Bank of Pakistan (SBP), as well as modification of the end-December 2015 performance criterion on net domestic assets of the SBP.

Following the Executive Board’s discussion of Pakistan, Deputy Managing Director and Acting Chair of the IMF Mitsuhiro Furusawa in a statement said economic growth remains robust and near-term vulnerabilities have receded. He said the Pakistani authorities have taken corrective measures to foster the achievement of programme objectives. Prudent macroeconomic policies and sustained implementation of the reform agenda are important to reinforce gains in economic stability and generate a strong and sustainable growth.

“The authorities’ commitment to further strengthening the fiscal position and lowering public debt is welcome. The focus is appropriately placed on revenue mobilization, including broadening the tax base and improving tax collection and compliance, with a view to creating fiscal space for pro-growth spending and greater social protection. Efforts are underway to strengthen coordination with the provinces and improve public financial management to reduce fiscal risks” the statement said.

He said low oil prices present a unique opportunity to strengthen external stability. Further accumulation of foreign exchange reserves would help enhance the economy’s resilience. The establishment of an independent monetary policy committee is a major welcome step. Sustained efforts are needed to further improve the monetary policy framework, reduce fiscal dominance, and strengthen central bank independence.

Mitsuhiro Furusawa said authorities remain committed to safeguarding financial stability. Priorities include reinforcing the supervisory framework, boosting bank capitalization, and improving access to finance. Preparatory work has progressed well for the introduction of credit bureaus and a deposit insurance scheme. It will be important to continue to strengthen corporate restructuring, insolvency, and collateral frameworks, as well as Pakistan’s regime against money laundering and the financing of terrorism.

He was of the opinion that the momentum of structural reforms must be maintained to achieve higher, sustainable, and more inclusive growth. Critical priorities include reducing arrears and increasing supply in the energy sector, restructuring and privatising loss-making public enterprises, improving the business climate and competitiveness, further strengthening social protection, and increasing female labour force participation.