IMF, Pakistan reach agreement to release around $500 million

The International Monetary Fund (IMF) and cash-strapped Pakistan on Tuesday reached an agreement over reforms paving the way for imbursement of $500 million as part of revival of a stalled bailout programme, the finance ministry said.

The IMF had agreed in 2019 to provide Pakistan $6 billion under a 39-month Extended Fund Facility (EFF) arrangement but it was disrupted due to Covid-19 pandemic last year.

Advisor on Finance Dr Abdul Hafeez Shaikh announced on social media that the agreement was reached at a stall-level meeting between the two sides.

"I would like to share that the Government of Pakistan has reached a staff-level agreement with the IMF. Overcoming the challenges created by the pandemic has required concerted effort," he tweeted.

The Advisor termed it as a "good development for Pakistan" while thanking Prime Minister Imran Khan and the IMF staff for their support.

An IMF team led by Ernesto Ramirez Rigo concluded virtual discussions with the Pakistani authorities and reached a staff-level agreement on the second to fifth reviews of the authorities’ reform programme, according to a statement by the Fund.

It said that the agreement strikes an appropriate balance between supporting the economy, ensuring debt sustainability and advancing structural reform.

"Pending approval of the Executive Board, the reviews' completion would release around $500 million," the IMF said.

It also said that Pakistan authorities were committed to ambitious policy actions and structural reforms to strengthen economic resilience, advance sustainable growth, and achieve the EFF’s medium-term objectives.

The fiscal support programme is key for Pakistan to win the international confidence in its economy which is struggling to come out of the impact of the pandemic.

Despite a hiatus in the bailout package, the IMF provided Pakistan $1.4 billion in emergency financing to support it mitigating the economic impact of Covid-19.

For the first time in 68 years, Pakistan’s economy contracted in the outgoing fiscal year with a negative 0.38 per cent due to the adverse impact of the Covid-19 pandemic coupled with the already weak financial situation before the deadly infection hit the country.