IMF approves loan’s third tranche of $500m for Pakistan

Mohammad Arshad

The International Monetary Fund has approved the release of the next loan tranche of around $500 million for Pakistan.

According to the declaration received here on Thursday, the approval was given after reviewing Pakistan’s progress in line with the program in the Board of Directors meeting.

The Executive Board of the International Monetary Fund approved a 39-month Extended Arrangement under the Extended Fund Facility for Pakistan in the amount of SDR 4,268 billion (about US$6 billion), equivalent to 210 percent of quota, on July 3, 2019.

The first review under the arrangement was completed by the Executive Board on December 19, 2019, based upon, inter alia, the reported observance of the quantitative performance criteria at end-September 2019, including the amount of government guarantees.

Upon completion of the first review under the EFF, Pakistan made a purchase equivalent to SDR 328 million (about US$452.4 million).

Subsequently, new information that came to the authorities’ attention, and which was shared with Fund staff, has revealed that the data on government guarantees dating back to FY 2016 was reported inaccurately.

The revised data indicates a nonobservance of the PC on government guarantees at end-September 2019 by a margin of PRs 357 billion (about 0.9 pc of GDP), which resulted in a noncomplying purchase and a breach of obligations under Article VIII, Section 5 of the IMF Articles of Agreement.

The authorities previously reported that the PC had been met with a margin of PRs 55 billion (0.1 pc of GDP) at end-September 2019. The statistical revision only had a small impact on public debt.

The authorities have taken strong corrective actions to address institutional and technical short-comings that gave rise to the inaccurate information, including creating a working group to reconcile and cross-check guarantees and debt data, announcing additional functions for the Debt Policy Coordination Office, including to act as custodian of all guarantees issued by the federal government and publishing a semi-annual debt bulletin that consolidates key debt statistics.

Beyond these actions, the authorities have committed to include a list of all new guarantees expected to be issued in the FY 2022 budget submitted to Parliament.

At the conclusion of the meeting, Deputy Managing Director Antoinette Sayeh and Acting Chair, stated, the Executive Board of the International Monetary Fund reviewed Pakistan’s remedial actions and data revisions linked to a non-complying purchase under the Extended Arrangement under the Extended Fund Facility as well as a breach of obligations under Article VIII, Section 5.

The non-complying purchase arose as a result of a lack of inter-agency coordination in the compilation of government guarantees provided by the federal government to state-owned enterprises that contributed to incorrect estimates of government guarantees starting as far back as FY 2016.