ISLAMABAD: A staff-level delegation of the International Monetary Fund (IMF) reached Islamabad on Monday to conduct its first quarterly review of the $6 billion bailout package extended to Pakistan in July this year on a set of economic indicators before releasing the second tranche of the loan, the Ministry of Finance said.
The IMF had granted the Extended Fund Facility, a three-year loan as requested by the incumbent government, to resuscitate the country’s ailing economy. The IMF said that the program was aimed at supporting “the authorities’ economic reform program” and to help “reduce economic vulnerabilities and generate sustainable and balanced growth.”
As indicated in the program documents, the fund will review Pakistan’s performance on a quarterly basis over a period of 39 months. The Extended Fund Facility will focus on a decisive fiscal consolidation to reduce public debt and build resilience while expanding social spending.
“The IMF delegation has reached Islamabad for the first quarterly review and to conduct meetings with relevant authorities for the next two weeks,” Omar Hamid Khan, spokesman for the Ministry of Finance, told Arab News on Monday.
Led by the Mission Chief to Pakistan Ernesto Ramirez-Rigo, the delegation will hold technical discussions with authorities from all relevant ministries, divisions, and departments to examine the latest data before winding up its trip on Nov 7.
The fund will release the second tranche of around $453 million in the first part of December this year, taking the total amount to almost $1.44 billion. The fund made an upfront disbursement of $991 million in July this year on completion of all prior actions committed by Pakistan before signing the fund program.
“The reform agenda that is currently in place in Pakistan and supported by the program is the right recipe for Pakistan to improve macroeconomic stability,” said Jihad Azour, Director Middle East and Central Asia Department at the IMF, while addressing a press briefing in Washington last week. “So far, the progress that has been achieved has gone in the right direction.”
The IMF has recently said the country’s growth will slow down from 3.3 percent in the last fiscal year to 2.4 percent in 2020 due to the ongoing fiscal adjustments but pick up pace after the stabilization measures bear fruit and macroeconomic imbalances were adjusted.
To meet the IMF target, the South Asian nation has also devalued its currency more than 27 percent over the last year, jacked up the key interest rate to 13.25 percent and all this has resulted in a 12.55 percent inflation rate – the highest since June 2011.
Dr. Ashfaque Hasan Khan, a senior economist and member of the Economic Advisory Council, said the government’s economic policies were heading in the right direction to achieve all the IMF targets with “minor adjustments on some indicators.”
“Pakistan has done well on both current account and fiscal deficits in the first quarter of this fiscal year,” he told Arab News. “This implies some very positive economic outcome by the end of the year.”
However, he said that a shortfall of over Rs150 billion was recorded in tax collection in the first quarter out of Rs5.5 trillion target set for this financial year. “This is not a big deal as the government can seek a waiver for it from the visiting IMF team,” he added.