IMF to provide $2.77 billion 'unconditional' funds to Pakistan this month

The International Monetary Fund (IMF) will provide $2.77 billion "unconditional" funds to Pakistan this month after the Imran Khan government agreed to address the global lender's concerns about a youth loan scheme, according to a media report.

Finance Minister Shaukat Tarin told media on Thursday that the government would address the global lender’s concerns over its proposed Rs 1.6 trillion worth of Kamyab Pakistan Programme (KPP) and take forward the $6 billion Extended Fund Facility (EFF) currently “in recess”, the Dawn News reported.

The minister said the IMF would transfer $2.77 billion of the country’s share to the State Bank of Pakistan (SBP) account on August 23 out of $650 billion general allocation the Washington-based lending agency made to all its members to boost international liquidity challenged by the global health pandemic.

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“Pakistan’s share in the general allocation is 0.43 per cent and $2.77 billion would be transferred to our account,” he said. “This support is unconditional, has no cost, will increase our reserves and will have a salutary effect on Pakistani rupee,” he said.

The finance minister said the government would now decide how to utilise the additional funds, but made it clear that he would not allow wastage and ensure their productive use so that fiscal sustainability achieved so far was not affected.

Responding to questions about the IMF’s EFF programme of 2019, the finance minister said he had a different approach to the programme when he assumed the charge and did not allow increase in power tariff and personal income tax as demanded because it was not progressive approach. Both demands would have impacted the economy while the country required economic growth, he added.

Tarin said there was no economic growth over the past three years that created a surplus power syndrome, but even 7-8 per cent growth might not have absorbed the full capacity. “We have been able to defer Rs 850 billion payables to independent power producers (IPPs) to create fiscal space and address some cash flow problems,” he said.

Because of different approaches on revenue and power sector, the IMF was asked to have a recess in the programme while the authorities show growth in revenue in two to three months.

Revenue performance in July has been 24 per cent higher than the target. The rationalisation of power tariff subsidies has also been submitted to the power regulator for proper targeting and will be settled in a month or so, he added.

“So the Fund programme is currently in recess but hale and hearty,” the minister said, adding that dialogue with the IMF was also in progress on the Kamyab Pakistan Programme on which the Fund had certain normal and genuine concerns which were being addressed.

He said revenue numbers for two-three months starting from June 2021 would be shared with the IMF soon for completion of its sixth review.