Pakistan, IMF inch towards restarting stalled loan programme

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The International Monetary Fund (IMF) and Pakistan have reached an agreement on a package of measures to complete second to fifth reviews for the release of a loan tranche, around $500 million, under IMF Extended Fund Facility (EFF).

A statement issued by the global lender said, “The package strikes an appropriate balance between supporting the economy, ensuring debt sustainability, and advancing structural reform. Pending approval of the Executive Board, the reviews’ completion would release around US$500 million,” said global lender in a statement.

“This agreement is subject to the approval of the IMF’s Executive Board. The reviews’ completion would release around US$500 million,” it added.

The development comes on the heels of a surge in power tariff announced by the Pakistani government to meet the requirements of the global lender to restore the halted negations for second tranche of the loan program, initiated in 2019.

Pakistan and IMF had inked a deal for around $6 billion in July 2019 with former receiving the first installment of $991.4 million during the same month. However, the second review of the programme is still pending since early last year as both sides were at odds over various matters including power tariff hike.

The IMF further said that the COVID-19 shock temporarily disrupted Pakistan’s progress under the EFF-supported program. However, the authorities’ policies and allowing higher than expected COVID-related social spending, have been critical in supporting the economy and saving lives and households.

The Pakistani authorities remain committed to ambitious policy actions and structural reforms to strengthen economic resilience, advance sustainable growth, and achieve the EFF’s medium-term objectives.

Besides praising the policies of the State Bank of Pakistan (SBP), it said: “The authorities are moving steadfastly on a number of other important reforms, including on strengthening regulatory agencies’ legal frameworks (NEPRA and OGRA Acts), consolidating SBP’s autonomy (SBP Act), and improving state owned enterprises (SOE) management (SOE Law).

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