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IMF and Pakistan Reach Agreement on Pending Reviews Under the Extended Fund Facility
Posted 11 mins ago by ProPK Staff
IMF staff and the Pakistani authorities have reached an agreement on a package of measures to complete second to fifth reviews of the authorities’ reform program supported by the IMF Extended Fund Facility (EFF).
An International Monetary Fund (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 program supported by the IMF 39-month Extended Fund Facility (EFF) arrangement for the amount of SDR 4,268 million (about US$6 billion).
The package 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 US$500 million, said the press release issued by the IMF.
The COVID-19 shock temporarily disrupted Pakistan’s progress under the EFF-supported program. However, the authorities’ policies and allowing higher than expected COVID-related social spending, have been critical in supporting the economy and saving lives and households, it added.
The Pakistani authorities remain committed to ambitious policy actions and structural reforms to strengthen economic resilience, advance sustainable growth, and achieve the EFF’s medium-term objectives, said the IMF.
This agreement is subject to the approval of the IMF’s Executive Board.
The reviews’ completion would release around US$500 million. At the end of the discussions, Mr. Ramirez Rigo issued the following statement:
“High-frequency economic data also started to point to a recovery. Considering these improvements, the economy is projected to expand by 1.5 percent in FY2021 from the -0.4 percent in FY2020. Still, with the COVID-19 second wave still unfolding around the world, the outlook is subject to a high level of uncertainty and downside risks,” it added.
“The Covid-19 shock has required a careful recalibration of the macroeconomic policy mix, the reforms calendar, and the EFF review schedule. Against this background, the authorities have formulated a package of measures that strikes an appropriate balance between supporting the economy, ensuring debt sustainability, and advancing structural reforms. The fiscal strategy remains anchored by the sustainable primary deficit of FY2021 budget and allows for higher-than-expected COVID-related and social spending to minimize the short-term impact on growth and the most vulnerable. The targets are supported by careful spending management and revenue measures, including reforms of corporate taxation to make it fairer and more transparent. The power sector’s strategy aims at financial viability, through management improvements, cost reductions, and adjustments in tariffs and subsidies calibrated to attenuate social and sectoral impacts,” it stated.
The State Bank of Pakistan (SBP)’s monetary and exchange rate policies have served Pakistan well and were critical in helping to navigate the COVID-19 shock. The strengthened international reserves’ position since the start of the program—with gross reserves almost doubling to USD$ 13 billion until January 2021 and net international reserves (NIR) increasing by over USD 9 billion until December 2020—and the shock absorption displayed by the market-based exchange rate, allowed the SBP’s to pre-emptively proceed to a large easing of monetary policy, and a sizeable expansion of refinancing facilities.
The banking system remains healthy, but it will be important for the SBP to continue to remain vigilant and prevent possible financial stability stress as the temporary support is phased out. International reserves are set to improve further reflecting current account developments, the EFF resumption, and international partners’ support.
“The authorities are moving steadfastly on a number of other important reforms, including on strengthening regulatory agencies’ legal frameworks (NEPRA and OGRA Acts), consolidating SBP’s autonomy (SBP Act), and improving state-owned enterprises (SOE) management (SOE Law). In addition, they have conducted a triage of SOE, and are moving forward with the audits of contracts awarded for COVID-19 related spending. They continue to enhance the effectiveness of their anti-monetary laundering/counter financing of terrorism (AML/CFT) framework and progress in completing their action plan with the Financial Action Task Force (FATF),” said the statement issued by the IMF.
propakistani.pk
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Posted 11 mins ago by ProPK Staff
IMF staff and the Pakistani authorities have reached an agreement on a package of measures to complete second to fifth reviews of the authorities’ reform program supported by the IMF Extended Fund Facility (EFF).
An International Monetary Fund (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 program supported by the IMF 39-month Extended Fund Facility (EFF) arrangement for the amount of SDR 4,268 million (about US$6 billion).
The package 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 US$500 million, said the press release issued by the IMF.
The COVID-19 shock temporarily disrupted Pakistan’s progress under the EFF-supported program. However, the authorities’ policies and allowing higher than expected COVID-related social spending, have been critical in supporting the economy and saving lives and households, it added.
The Pakistani authorities remain committed to ambitious policy actions and structural reforms to strengthen economic resilience, advance sustainable growth, and achieve the EFF’s medium-term objectives, said the IMF.
This agreement is subject to the approval of the IMF’s Executive Board.
The reviews’ completion would release around US$500 million. At the end of the discussions, Mr. Ramirez Rigo issued the following statement:
“As a result of the authorities’ actions, the COVID-19 first wave started to abate over the 2020 summer and the impact on the economy was significantly reduced. The external current account improved, due to stronger-than-expected remittances, import compression, and a mild export recovery, read the statement.
“High-frequency economic data also started to point to a recovery. Considering these improvements, the economy is projected to expand by 1.5 percent in FY2021 from the -0.4 percent in FY2020. Still, with the COVID-19 second wave still unfolding around the world, the outlook is subject to a high level of uncertainty and downside risks,” it added.
“The Covid-19 shock has required a careful recalibration of the macroeconomic policy mix, the reforms calendar, and the EFF review schedule. Against this background, the authorities have formulated a package of measures that strikes an appropriate balance between supporting the economy, ensuring debt sustainability, and advancing structural reforms. The fiscal strategy remains anchored by the sustainable primary deficit of FY2021 budget and allows for higher-than-expected COVID-related and social spending to minimize the short-term impact on growth and the most vulnerable. The targets are supported by careful spending management and revenue measures, including reforms of corporate taxation to make it fairer and more transparent. The power sector’s strategy aims at financial viability, through management improvements, cost reductions, and adjustments in tariffs and subsidies calibrated to attenuate social and sectoral impacts,” it stated.
The State Bank of Pakistan (SBP)’s monetary and exchange rate policies have served Pakistan well and were critical in helping to navigate the COVID-19 shock. The strengthened international reserves’ position since the start of the program—with gross reserves almost doubling to USD$ 13 billion until January 2021 and net international reserves (NIR) increasing by over USD 9 billion until December 2020—and the shock absorption displayed by the market-based exchange rate, allowed the SBP’s to pre-emptively proceed to a large easing of monetary policy, and a sizeable expansion of refinancing facilities.
The banking system remains healthy, but it will be important for the SBP to continue to remain vigilant and prevent possible financial stability stress as the temporary support is phased out. International reserves are set to improve further reflecting current account developments, the EFF resumption, and international partners’ support.
“The authorities are moving steadfastly on a number of other important reforms, including on strengthening regulatory agencies’ legal frameworks (NEPRA and OGRA Acts), consolidating SBP’s autonomy (SBP Act), and improving state-owned enterprises (SOE) management (SOE Law). In addition, they have conducted a triage of SOE, and are moving forward with the audits of contracts awarded for COVID-19 related spending. They continue to enhance the effectiveness of their anti-monetary laundering/counter financing of terrorism (AML/CFT) framework and progress in completing their action plan with the Financial Action Task Force (FATF),” said the statement issued by the IMF.
IMF and Pakistan Reach Agreement on Pending Reviews Under the Extended Fund Facility
IMF staff and the Pakistani authorities have reached an agreement on a package of measures to complete second to fifth
propakistani.pk
