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IMF, Pakistan reach agreement on first review under the extended agreement

Press Trust of India  |  Washington 

The International Monetary Fund (IMF) has reached an accord with Pakistan to complete the first review under the extended agreement that will allow significant funding to the cash-strapped country from bilateral and multilateral partners, the global financial body said on Friday.

An IMF mission was in Pakistan from October 28 to November 8 to review the cash-strapped country's quarterly performance under its USD 6 billion bailout package, which was finalised this year.

A completion of the review under the Extended Fund Facility (EFF) will enable disbursement of USD 450 million to Pakistan and will help unlock significant funding from bilateral and multilateral partners, the IMF said.

The Pakistani authorities and IMF staff have reached a staff-level agreement on policies and reforms needed to complete the first review under the EFF (Extended Fund Facility), Ernesto Ramirez Rigo, who led the IMF mission to Islamabad, said.

The IMF in July had approved a USD 6 billion EFF loan over a period of three years for Pakistan, aimed at returning sustainable growth to the country's fragile economy and improve the standards of living.

Noting that all performance criteria were met with comfortable margins and progress continues towards meeting all structural benchmarks, the IMF said the Pakistan government's policies have started to bear fruit, helping to reverse the buildup of vulnerabilities and restore economic stability.

The external and fiscal deficits are narrowing, inflation is expected to decline, and growth, although slow, remains positive. Sustaining sound policies and advancing structural reforms remain key priorities to enhance resilience and pave the way for stronger and sustainable growth, it said.

Despite a difficult environment, programme implementation has been good, and all performance criteria for end-September were met with comfortable margins. Work continues towards completing the remaining structural benchmarks for end-September, Rigo said.

Significant progress has been made in improving the AML/CFT framework, although additional work is needed before March 2020. International partners remain committed to supporting the authorities' reform efforts, providing the necessary financing assurances, said the top IMF official.

On the macroeconomic front, signs that economic stability is gradually taking hold are steadily emerging.

The external position is strengthening, underpinned by an orderly transition to a flexible, market-determined exchange rate by the State Bank of Pakistan (SBP) and a higher-than-expected increase in SBP's net international reserves, he said.

Budgetary revenue collections are growing on the back of efforts on tax administration and policy changes, and despite the ongoing compression in import-related taxes, he added.

Inflation pressures are expected to recede soon, reflecting an appropriate monetary stance. Importantly, measures to strengthen the social safety net are being implemented, and development spending is being prioritized.

The near-term macroeconomic outlook is broadly unchanged from the time of the programme approval, with gradually strengthening activity and average inflation expected to decelerate to 11.8 percent in FY2020. However, domestic and international risks remain and structural economic challenges persist, Rigo said.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, November 08 2019. 21:45 IST