The International Monetary Fund (IMF) and Pakistan have finally reached a staff-level agreement on economic policies for a three-year extended fund facility.
Under the agreement, Pakistan will get six billion dollars in three years, while an additional amount of two to three billion dollars may likely come from World Bank and Asian Development Bank on less interest rate. The program aims to support the authorities’ strategy for stronger and more balanced growth by reducing domestic and external imbalances, improving the business environment, strengthening institutions, increasing transparency, and protecting social spending.
Prime Minister’s Advisor on Finance Dr. Abdul Hafeez Shaikh said the IMF programme will be implemented after its formal approval from fund’s board. He said the agreement will improve debt situation and sent a positive signal to the world to attract foreign investment. To a question, Shaikh said prices in some areas will have to be increased to put Pakistan’s economy under some financial discipline. But, it would not affect common people in anyway. He said electricity consumers using less than 300 units will have no impact of enhanced prices.
Dr. Abdul Hafeez Shaikh said allocation for social safety network under Ehsas and BISP are being doubled for which 180 billion rupees will be allocated in the next budget to provide relief to the common masses.
Here’s the details of loan package agreement
In response to a request by the Pakistani authorities, an International Monetary Fund (IMF) mission led by Mr. Ernesto Ramirez Rigo visited Islamabad, Pakistan from April 29 to May 11 to discuss IMF support for the authorities’ economic reform program. At the end of the visit, Mr. Ramirez Rigo made the following statement:
“The EFF aims to support the authorities’ ambitious macroeconomic and structural reform agenda during the next three years. This includes improving public finances and reducing public debt through tax policy and administrative reforms to strengthen revenue mobilization and ensure a more equal and transparent distribution of the tax burden. At the same time, a comprehensive plan for cost-recovery in the energy sectors and state-owned enterprises will help eliminate or reduce the quasi-fiscal deficit that drains scarce government resources”.
“The forthcoming budget for FY2019/20 is a first critical step in the authorities’ fiscal strategy. The budget will aim for a primary deficit of 0.6 percent of GDP supported by tax policy revenue mobilization measures to eliminate exemptions, curtail special treatments, and improve tax administration. This will be accompanied by prudent spending growth aimed at preserving essential development spending, scaling up the Benazir Income Support Program and improve targeted subsidies, with the goal of protecting the most vulnerable segments of society.
“The State Bank of Pakistan will focus on reducing inflation, which disproportionately affects the poor, and safeguarding financial stability. A market-determined exchange rate will help the functioning of the financial sector and contribute to a better resource allocation in the economy. The authorities are committed to strengthening the State Bank of Pakistan’s operational independence and mandate.
“An ambitious structural reform agenda will supplement economic policies to rekindle economic growth and improve living standards. Priority areas include improving the management of public enterprises, strengthening institutions and governance, continuing anti-money laundering and combating the financing of terrorism efforts, creating a more favorable business environment, and facilitating trade. To improve fiscal management the authorities will engage provincial governments on exploring options to rebalance current arrangements in the context of the forthcoming National Financial Commission.
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