IMF to release tranche of $501m
ISLAMABAD: International Monetary Fund’s (IMF) Executive Board has completed the eleventh review under the Extended Fund Facility (EFF) for Pakistan, enabling the immediate disbursement of an amount equivalent to SDR 360 million (about $501 million), bringing total disbursements to SDR 4.32 billion (about $6.01 billion).
According to a statement issued by the fund, the executive board’s decision enabled the immediate disbursement of an amount equivalent to about $501 million, bringing total disbursements to about $6.01 billion. The Executive Board of the International Monetary Fund (IMF) on June 27 completed the eleventh review of Pakistan’s economic performance under a three-year programme supported by an EFF arrangement.
On September 4, 2013, the executive board approved the 36-month extended arrangement under the EFF in the amount of $6.64 billion at the time of approval of the arrangement or 216 percent of Pakistan’s current quota at the IMF.
Following the executive board’s discussion of Pakistan, Deputy Managing Director and Acting Chair Mitsuhiro Furusawa on the occasion stated that the economic recovery has gradually strengthened and short-term vulnerabilities have further receded on the back of improved macroeconomic stability and progress on structural reforms. “Preserving and consolidating macroeconomic stability and further advances with key structural reforms, including beyond the programme’s horizon, are needed to foster stronger and more inclusive growth,” he remarked.
Furusawa said that the authorities are on track to achieve their programme’s end-year fiscal targets, and their commitment to continue with gradual fiscal consolidation in FY2016/17 was welcome.
The amendments to the Fiscal Responsibility and Debt Limitation Act, he said, would strengthen the anchor for medium-term fiscal policy, supporting fiscal sustainability and medium-term macroeconomic stability. Furthermore, he said that the new framework for public-private partnerships would foster much needed growth-supporting investments and help manage associated fiscal risks.
“Sustaining progress with tax administration reforms, with a view to widening the tax base, is needed to increase tax revenues and create needed fiscal space for priority infrastructure and to reinforce social expenditures,” he remarked.
He said that foreign exchange reserves have been progressively rebuilt under the programme, and the continued accumulation of international reserves would further bolster external buffers and reduce vulnerabilities. Maintaining a prudent monetary policy stance, he said, was needed to preserve the achievements in containing inflation and to support macroeconomic stability.
“Progress in strengthening the SBP’s autonomy is welcome, and addressing the remaining recommendations of the 2013 IMF Safeguards Assessment would be important to strengthen it further,” he remarked. “Advancing financial sector reforms is important to reinforce financial sector stability and development. Important steps include moving ahead with establishing a deposit insurance scheme and strengthening the regulatory and supervisory framework. The expansion of the coverage of tax crimes under the AML framework is welcome and would contribute to improve tax compliance and governance.”
IMF deputy managing director said that continued progress with structural reforms is needed to raise Pakistan’s growth potential. Restructuring and privatizing loss-making public sector enterprises (PSEs) remain a priority to ensure their financial viability, reduce fiscal costs and strengthen the efficiency of the economy.
In light of the delays in the privatization agenda earlier in the year, the authorities’ commitment to attract private sector participation, while putting in place measures to reduce PSEs’ financial losses, was welcome, he remarked. Furthermore, he said that efforts to complete the energy sector reform should remain a priority.
The authorities’ decision to further contain the accumulation of power sector arrears in the remainder of the programme is welcome, as is their focus on further strengthening the performance of power distribution companies and the updating of the power sector arrears reduction plan.
He added that Pakistan’s commitment to move forward with the implementation of the new business climate reform strategy would be key to boost competitiveness and foster investment and private sector led growth.