Islamabad, 22 November 2021 (TDI): Pakistan and the International Monetary Fund (IMF) announced today; that both reached an agreement after the negotiations. The agreement will help to revive a stalled 6 billion funding program for Pakistan.
The IMF released a statement regarding the agreement. They stated that both reached a staff-level agreement on policies and reforms that are necessary to complete the 6th review.
The IMF then added that the Executive Board still has to approve the agreement, following the implementation of fiscal and institutional reforms. Pakistan’s government bonds increased from 1.3 and 2.8 cents on the dollar when they announced the agreement.
The completion of the 6th review would make available around 750 million in drawing rights, or 1 billion. The total disbursements would be around 3 billion, according to the statement. Pakistan’s Financial Adviser, Shaukat Tarin, stated last week that the country needed to complete five reforms before the IMF re-activated the program.
Those reforms include legislation on central bank autonomy; because that reform is to ensure its independence over several financial aspects. The central bank could ensure its independence over monetary policy, inflation control, increased energy tariffs, and also withdrawal of tax exemptions.
Tarin ensured that Pakistan will pass that legislation as promised to the IMF. He then added that the government believes that the central bank should be independent. Tarin also announced the commitment to take other four actions.
Those actions are for Pakistan to withdraw tax exemptions and subsidies, increase the petroleum levy, and higher energy tariffs. Tarin also mentioned that an audit was necessary on the funds that the IMF lent Pakistan, to help the country with the COVID-19.
PAKISTAN’S ENTRANCE TO THE PROGRAM
Pakistan entered the funding program in 2019. The program of the IMF has a duration of 39 months, but the organization stalled the funding earlier this year. According to the IMF, the reason was that there were some problems with the reforms.
The IMF remarked that Pakistan met the quantitative performance criteria, except for the one on the primary budget deficit. The spokesman of Pakistan’s Finance Minister statement, regarding the agreement of the IMF, that it will remove a lot of uncertainties. It will remove uncertainties because Pakistan has been facing economic challenges.
PAKISTAN’S ENTRANCE TO THE FUND
Pakistan entered into the International Monetary Fund in 1950. In 1958, the IMF lent Pakistan around 25,000. In total, the Fund has lent money to Pakistan 22 times since the entrance of the country. The last loan was in April 2020, when the IMF lent Pakistan 1.4 billion to help the country face the COVID-19.