THE International Monetary Fund (IMF) on Tuesday announced that it has reached a staff-level agreement (SLA) with Pakistan to release $1.2 billion in fresh funding after completing its latest programme review.
The agreement, which remains subject to approval by the IMF Executive Board, comprises $1 billion under the Extended Fund Facility (EFF) and $200 million under the Resilience and Sustainability Facility (RSF). Once approved, total disbursements under both arrangements will reach around $3.3 billion.
It is a welcome development in the backdrop of consistent reports about differences of opinion caused mainly by the situation arising out of the devastating floods that inflicted heavy losses on crops and infrastructure with attendant consequences for the GDP growth and revenue generation. However, the statement released by the Fund is yet another manifestation of the growing confidence of the global institutions in the economic performance of the country and their resolve to continue closer cooperation with Islamabad to help carry forward the process of reforms and stabilization. Negative trends in the Karachi Stock Exchange witnessed last week were attributed to differences with the IMF and the possible delay in reaching an accord but credit goes to the economic team led by Finance Minister Muhammad Aurangzeb for presenting Pakistan’s case in a persuasive manner during negotiations first in Islamabad and then in Washington. The IMF noted that Pakistani authorities were committed to sustaining the fiscal effort to strengthen public finances while providing needed support to the victims of the recent floods, ensuring inflation remains durably within the SBP’s target range, restoring the viability of the energy sector and advancing structural reforms. Key policy priorities include continuing fiscal consolidation, strengthening poverty reduction measures, improving revenue mobilization, maintaining a tight and data-driven monetary policy, restoring the energy sector’s financial health and advancing climate resilience initiatives. Reforms so far held have improved economic and financial conditions of the country, therefore, these should continue as part of the policy to reduce dependence on foreign aid that adds to the debt burden and comes at economic and political cost. However, it is hoped that the Government will devise a policy to realize its goals as agreed with the IMF without further burdening the existing taxpayers and triggering price-hike, which is already a source of concern for people of Pakistan.
