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IMF announces resumption of $6b program with Pakistan

The Pakistani authorities and IMF staff have reached a staff-level agreement on policies and reforms.

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The International Monetary Fund (IMF) said on Monday it has reached a staff level agreement to revive stalled funding for Pakistan.

“The Pakistani authorities and IMF staff have reached a staff-level agreement on policies and reforms needed to complete the sixth review,” the IMF said in a statement.

The IMF said it reached a staff-level agreement on policies and reforms needed to complete the sixth review under the $6 billion Extended Fund Facility (EFF). However, it said the agreement is subject to approval by the executive board.

“Completion of the review would make available special drawing rights (SDR) 750 million (about $1,059 million), bringing total disbursements under the EFF to about $3,027 million and helping unlock significant funding from bilateral and multilateral partners,” the IMF statement said.

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“An additional SDR 1,015.5 million (about $1,386 million) was disbursed in April 2020 to help Pakistan address the economic impact of the Covid-19 shock,” it added.

Fahad Rauf of IIS Research said Pakistan would receive $1.06 billion, which will take the total to $3.03 billion or 50 per cent of the programme.

“As expected, IMF is back! This would provide much needed clarity and take ‘minus IMF’ option out of the equation,” he said.

In a research note, he said the IMF expects GDP growth to exceed four per cent in 2021-22 and inflation will start declining after the impact of supply and demand side pressures and the rupee depreciation is absorbed.

“The rupee will recover some grounds against the US dollar and stable around 170,” he said.

He said interest rates would further increase as IMF wants SBP to adopt inflation targeting regime.

Read more: IMF cannot dictate policies to institutions in Pakistan, Teresa Daban

“Electricity tariffs would also continue to increase. Work on circular debt management plan would speed up and it would be positive for energy chain,” he said, adding that petroleum levy will be increased if oil prices sustain at current levels.

Reuters with additional input by GVS News Desk

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