• Live
    • Audio Only
  • google plus
  • facebook
  • twitter
News > Pakistan

Pakistan and IMF Reach Staff-Level Agreement for $6 Billion

  • A vendor arranges different types of rice, with their prices displayed, at his shop in a wholesale market in Karachi, Pakistan April 2, 2019

    A vendor arranges different types of rice, with their prices displayed, at his shop in a wholesale market in Karachi, Pakistan April 2, 2019 | Photo: Reuters

Published 12 May 2019
Opinion

Currently, the agreement is subject to IMF management and Executive Board approval, as well as subject to the timely implementation of prior actions.

Pakistan’s government and the International Monetary Fund (IMF) mission have reached a staff-level agreement for US$6 billion over the next three years, the IMF reported on Sunday. 

RELATED:
Four Horsemen of the New IMF Deal With Ecuador

Prime Minister Imran Khan's government has been facing dwindling foreign exchange reserves, low exports, high inflation, and what many consider a macroeconomic crisis. This has pushed PM Khan to ask the IMF once again for a bailout, which would be the 22nd time the institution would lend money in the last 60 years.

The mission led by Ernesto Ramirez Rigo visited Islamabad from April 29 to May 11 to discuss IMF support for the authorities’ economic reform program. Currently, the agreement is subject to IMF management and Executive Board approval, as well as subject to the timely implementation of prior actions and confirmation of international partners’ financial commitments, which mean the compliance to implement an “ambitious structural reform agenda.” 

“The budget will aim for a primary deficit of 0.6 percent of GDP supported by tax policy revenue mobilization measures to eliminate exemptions, curtail special treatments, and improve tax administration," Ramirez detailed as critical in the country fiscal strategy.

Following these steps, the IMF would then process the deal in the context of what it calls an Extended Fund Facility (EFF). “The EFF aims to support the authorities’ ambitious macroeconomic and structural reform agenda during the next three years,” read the official statement from the IMF. 

An EFF is used  "to assist member countries in overcoming balance of payments problems that stem from structural problems,” highlights IMF’s debt policy. In order to receive this amount, the government has to apply austerity measures which usually mean cut in social spending, job cuts, rising costs of living and elimination of welfare schemes.

"These structural changes are in our interest if we want to take our people in the direction of prosperity and improve their quality of life," Adviser to Prime Minister on Finance, Revenue, and Economic Affairs Abdul Hafeez Shaikh said, adding that “the government is focused on not putting too much burden on the common man."

Besides the IMF assistance, Pakistan will also receive additional funds worth nearly US$3 billion from partner institutions like the World Bank and the Asian Development Bank, the adviser revealed.

It was not immediately clear if the U.S - who exerts pressure on the IMF - would support the agreement announced Sunday, as China has been investing in Pakistan’s infrastructure for the One Belt, One Road initiative. 

One of the flagship projects of it is the China-Pakistan Economic Corridor, which links Kashgar in Xinjiang with the Port of Gwadar, the project is estimated at US$46 billion and is currently underway. Pakistani authorities have said they are in touch with Washington and are seeking its support.

Comment
0
Comments
Post with no comments.