— Loan size increased to $7 billion, extended it till June 2023
— All executive directors supported Pakistan’s request for loan, India abstains
ISLAMABAD: The International Monetary Fund (IMF) on Monday revived Pakistan’s programme and its board approved the revival of Extended Fund Facility (EFF) program for disbursement of $1.17 billion for seventh and eight tranche.
The global lender also approved to increase the loan size to around $7 billion and extended it till June 2023. Finance Minister Miftah Ismail took to social media blogging site, Twitter, to congratulate the nation over the development.
All executive directors supported Pakistan’s request for loan approval and extension except India that abstained from the voting. The board members raised questions over the reversal of the commitments that Pakistan had given in February this year but acknowledged the politically difficult steps that Pakistan took to revive the programme.
The Board has approved completion of the combined 7th and 8th review under the EFF and release of the tranche of SDR 894 million or $1.17 billion, according to the Pakistani officials.
The Board has also approved the extension of the programme through end-June 2023, and augmentation of access by SDR 720 million or $930 million. With the augmentation, the programme size has been increased to the SDR4.988 billion, which is equivalent to 245.6 per cent of quota of Pakistan.
The IMF Board expressed condolences and sympathies with Pakistani authorities over the tragic loss of lives and livelihoods caused by the floods in the country, according to the sources. The board appreciated that Pakistani government made efforts to put the programme back on track and renewed commitment to programme policies and targets.
As per the commitment, Pakistan will have to show primary budget surplus target of Rs153 billion or 0.2% of the GDP, until it is mutually revised in consultation with the IMF staff.
The sources said that the executive directors representing the UAE, Saudi Arabia and Qatar also gave assurances to provide additional financing to Pakistan, as agreed between Islamabad and the IMF staff.
The previous government of the Pakistan Tehreek-i-Insaf (PTI) had signed the 39-month EFF in July 2019 aimed at avoiding default on foreign repayment obligations. However, the country remained in turmoil and despite remaining in the IMF programme, its foreign exchange reserves remained thin amid heightened external debt-related vulnerabilities.
Due to faulty EFF programme design, unrealistic targets and lack of political commitment to implement what former premier and PTI chief Imran Khan had himself agreed to, the programme remained suspended for almost two years out of three years.
PM commends Miftah
Commending Finance Minister Miftah Ismail and his team and other stakeholders for their hard work over the issue, Prime Minister Shehbaz Sharif in a Twitter post said: “The formal resumption of an IMF programme is a major step forward in our efforts to put Pakistan’s economy back on track. It is outcome of an excellent team effort.”
It is pertinent to note that the executive board meeting of the International Monetary Fund considered the provision of credit to Pakistan’s bailout package and approved the 7th and 8th tranche of $1.17 billion besides extending the program for one more year.
Previously in July IMF had reached a staff-level agreement with Pakistan paving the way for the disbursement of $1.17 billion, subject to approval by the IMF’s Executive Board.
“The IMF team has reached a staff-level agreement (SLA) with the Pakistan authorities for the conclusion of the combined seventh and eighth reviews of the EFF-supported program. The agreement is subject to approval by the IMF’s Executive Board. Subject to Board approval, about $1,177 million (SDR 894 million) will become available, bringing total disbursements under the program to about $4.2 billion,” the IMF said in a statement at the time.
