Islamabad/Washington, Mar 20
The IMF on Wednesday said it has reached a staff-level agreement with the new government in cash-strapped Pakistan on the final review of a USD 3 billion bailout, paving the way for the release of the last USD 1.1 billion tranche from the global lender.
The agreement, however, is subject to the approval of the Executive Board of the International Monetary Fund (IMF) to be held in April.
Pakistan’s new finance minister Muhammad Aurangzeb, who assumed charge last week, had said that his priority was to start negotiations with the Washington-based IMF to bail out the country from its financial woes.
Last year, the IMF Executive Board approved the USD 3 billion Stand-By Arrangement (SBA) for Pakistan, the term for which is set to expire next month. So far, two tranches have been issued while the last one is pending the review of the conditions set by the lender.
Led by IMF’s Mission chief to Pakistan, Nathan Porter, the team visited Islamabad from March 14 to 19 and discussed the Second Review of Pakistan’s economic programme with senior officials.
“The IMF team has reached a staff-level agreement with the Pakistani authorities on the second and a final review of Pakistan’s stabilisation programme supported by the IMF’s USD 3 billion SBA,” the IMF said in a statement at Washington.
“The agreement recognises the strong programme implementation by the State Bank of Pakistan and the caretaker government in recent months, as well as the new government’s intentions for ongoing policy and reform efforts to move Pakistan from stabilisation to a strong and sustainable recovery,” the IMF statement said.
Porter said in the statement that Pakistan’s economic and financial position improved in the months since the first review, “with growth and confidence continuing to recover on the back of prudent policy management and the resumption of inflows from multilateral and bilateral partners” but cautioned that the economic growth remained modest and inflation was above the target level.
The IMF also said that Pakistan will further increase gas and electricity prices to keep the circular debt at the agreed level in this fiscal year.
“Given the timing of the Second Review mission, immediately following the formation of the new Cabinet, we expect the review to be considered by the IMF’s Board in late April,” the Fund said.
“The new government is committed to continue the policy efforts that started under the current SBA to entrench economic and financial stability for the remainder of this year,” the Fund said.
The successful completion of the review is expected to lead to another loan programme by the IMF for Pakistan which it still needs to support its balance of payments.
Last year, the timely support by the IMF helped the country to avoid a potential default on its external liabilities.
Meanwhile, the agreement with the IMF resounded in the country’s stock market and shares at the Pakistan Stock Exchange (PSX) climbed 374 points.
