The International Monetary Fund (IMF) and Pakistan reached a staff-level agreement on policies and reforms needed to complete the sixth review under the $6 billion Extended Fund Facility (EFF), which has been ‘in recess’ since April, the Fund announced in a statement on Monday.
The agreement is subject to approval by the Executive Board, following the implementation of prior actions, notably on fiscal and institutional reforms. The approval of the agreement will make available 750 million in Special Drawing Rights (SDR), equivalent to $1,059m, read the statement.
The Fund acknowledged Pakistan’s progress in improving its anti-money laundering and combatting the financing of terrorism (AML/CFT) regime. However, additional time was needed to strengthen its effectiveness, according to the statement.
“Available data suggest that a strong economic recovery has gained hold, benefiting from the authorities’ multifaceted policy response to the Covid-19 pandemic that has helped contain its human and macroeconomic ramifications,” the IMF said.
“At the same time, external pressures have started to emerge: a widening of the current account deficit and depreciation pressures on the exchange rate — mainly reflecting the compound effects of the stronger economic activity, an expansionary macroeconomic policy mix, and higher international commodity prices.”
The IMF emphasised that the monetary policy needs to remain focused on curbing inflation, preserving exchange rate flexibility, and strengthening international reserves.
The introduction of the Finance Bill in the National Assembly to increase taxes and approval of the State Bank of Pakistan (SBP) Amendment Bill are pre-conditions for the revival of the IMF loan programme, Finance Adviser Shaukat Tarin said last week.
The IMF said that despite a difficult environment, progress continues to be made in the implementation of the EFF-supported programme.
“All quantitative performance criteria (PCs) for end-June were met with wide margins, except for that on the primary budget deficit”, said the IMF.