IMF approves revival of extended Fund Facility for Pakistan

 Pakistan will get $1.17 billion tranche from IMF to stabilise its depleting foreign reserves

The IMF Executive Board approves revival of loan program for Pakistan today. It means Pakistan has avoided a potential threat of default. It is a big sigh of relieve for struggling Pakistani economy.

Finance Minister Miftah Ismail announced on Monday that the IMF's Executive Board has approved the seventh and eighth tranche worth $1.17 billion of its stalled Extended Fund Facility (EFF). "Alhamdolillah the IMF Board has approved the revival of our EFF program," Miftah tweeted, while congratulating the nation on securing the much needed bailout money.

In his tweet, the minister also thanked Prime Minister Shahbaz Sharif for taking tough economic decisions to stabilise the country's economy during a time when it was at a risk of default.

After months-long efforts of the coalition government that came into power in April completed all conditions of the Washington-based lender after which the executive board resumed the programme and approved the seventh and eighth loan tranches. Pakistan is now likely to receive a $1.17 billion loan tranche from Fund within six days.

Pakistan reached the staff-level agreement with the Washington-based lender in July but the board meeting could not be held despite Pakistan’s appeal to expedite the process.

All executive directors supported Pakistan’s request for loan approval and extension except India that abstained from the voting. The board members raised questions over the reversal of the commitments that Pakistan had given in February this year but acknowledged the politically difficult steps that Pakistan took to revive the programme.

The IMF Board expressed condolences and sympathies with Pakistani authorities over the tragic loss of lives and livelihoods caused by the floods in the country, according to the sources. The board appreciated that Pakistani government made efforts to put the programme back on track and renewed commitment to programme policies and targets.

As per the commitment, Pakistan will have to show primary budget surplus target of Rs153 billion or 0.2% of the GDP, until it is mutually revised in consultation with the IMF staff.

The sources said that the executive directors representing the UAE, Saudi Arabia and Qatar also gave assurances to provide additional financing to Pakistan, as agreed between Islamabad and the IMF staff.

Pakistan entered the IMF programme in 2019, but only half the funds had been disbursed as Islamabad has struggled to keep targets on track. The last disbursement was in February and the next tranche was to follow a review in March, but the government of ousted Prime Minister Imran Khan introduced costly fuel price caps which threw fiscal targets and the programme off track.

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