ISLAMABAD: The International Monetary Fund (IMF) has agreed to give Pakistan $1.1 billion loan before December 15.
Pakistan and the International Monetary Fund (IMF) in Dubai successfully completed negotiations on the fourth review as well as the fifth review under the three-year Extended Fund Facility (EFF) programme for an amount of US$6.64 billion. This will enable the IMF mission to go to its board for the release of the fifth tranche of about US$1.1 billion, possibly before December 15. The completion of the fourth and fifth reviews is indicative of the government’s commitment to implement structural reforms in the areas of taxation, energy, the monetary and financial sectors as well as public sector enterprises, Finance Minister Ishaq Dar said while talking to the media on the conclusion of negotiations with the IMF team spread over almost 11 days.
The minister told the media, “We have successfully completed the negotiations of the fourth and fifth reviews. This has been a team effort. Our challenges remain numerous but we are determined that we will remain on track in achieving the objectives of the programme (of economic development) in line with the PML-N’s 2013 election manifesto”.
He added, “The policies we have adopted have already changed the economic direction of the country and have put our economy back on the road to recovery, stability and economic prosperity.” The finance minister complimented Jeffrey Franks, the Mission Chief of the IMF, and his team members for an outstanding job done in conducting the fourth and fifth reviews.
Geoffery Franks, who was heading the IMF team, in his statement on the occasion said that the IMF mission held “productive discussions” with Pakistan government officials on Pakistan’s economic performance under the EFF programme and “is encouraged by the overall progress in strengthening macroeconomic stability and output growth.” He said the mission reached understandings with the authorities on a Memorandum of Economic and Financial Policies which, upon the management’s approval, would be considered by the IMF Executive Board in December to conclude the fourth and fifth reviews. Upon approval, SDR 720 million (about US$1.1 billion) would be made available to Pakistan.
Geoffrey went on to say that the mission was encouraged by the strong fiscal performance achieved during FY 2013/2014, and by the authorities’ determination to further lower the deficit to 4.7 percent of GDP in the current fiscal year. “The mission reaffirms the IMF’s support to the government’s efforts to implement their economic reform efforts in improving the business climate”, Geoffrey Franks remarked.
Earlier during talks the minister briefed the IMF team about the economic activity in Pakistan that continues to improve. GDP grew by 4.14 percent in FY 2013-14 and for FY 2014-15, the GDP target had been estimated at 5.1 percent. He further apprised the IMF team that Pakistan’s overall balance of payments position had remained broadly in line with expectations. High growth in workers’ remittances (up 19.52 percent in the first quarter of FY 2014-15 as compared to same period last year) continued to help contain the current account deficit in the balance of payments.
The combined foreign exchange reserves of the SBP and scheduled banks closed at US$13.339 billion on November 5, 2014, he added. The finance minister further informed the IMF team that Inflation had declined. The latest numbers indicate that that CPI inflation declined to its 17-month low rate of 5.8 percent in October 2014. During the July-Oct 2014 period, inflation was contained at 7.1 percent as compared to 8.3 percent during the corresponding period last year. With current trends, it is expected that the annual average CPI inflation target of 8 percent for FY 2014-15 would be achieved. He added that FBR revenues increased by 13.1 percent in the first quarter of FY 2014-15 as compared with the same period last year.
Withdrawal of SROs was initiated through the budget 2014-15 as committed by the government, the minister said. Finance Minister Dar also briefed the IMF team that the government continued its support to the poor and most vulnerable segments of the population through BISP. The target for FY 2013-14, to benefit approximately 4.8 million families, was achieved. In the budget for FY 2014-15, the stipend paid to the poorest families has been increased from Rs3,600 to Rs4,500 per family per quarter. The coverage would also be increased to 5.3 million families by end June 2015.
On the energy sector, the IMF team was informed that Pakistan would promote policies for private investment for power generation through both the entry of new players as well as expanding existing capacity of the IPPs, systematically adhering to energy mix targets and least-cost generation plans. The expansions are expected to generate an additional 2,000 MW by 2016.
