In its first intervention in Asia since the beginning of the current financial crisis, the International Monetary Fund (IMF) has approved a $7.6-billion rescue fund for Pakistan that will support the country’s economic stabilisation programme.
Upon the approval of the IMF’s Executive Board, an amount equivalent to $3.1 billion becomes immediately available to Pakistan, and the remaining amount will be phased in, subject to quarterly reviews in a 23-month stand-by arrangement under which the total amount of resources made available equal 500 per cent of the country’s quota.
The arrangement was approved by the Board under the Fund’s fast-track Emergency Financing Mechanism procedures. The IMF-supported programme aims to achieve the key objectives of restoring macroeconomic stability and confidence through a tightening of macroeconomic policies and to ensure social stability and adequate support for the poor and vulnerable in Pakistan.
“The programme targets a significant reduction in fiscal deficit, aimed at eliminating State Bank of Pakistan financing of the government and reducing the external current account deficit, while allowing for increased social and development spending,” Takatoshi Kato, deputy managing director and acting chairman, said following the Executive Board discussion.
The reduction, he said, will be achieved primarily by phasing out energy subsidies, better prioritising development spending, and implementing tax policy and tax administration reforms.