ISLAMABAD   -  The International Monetary Fund (IMF)’s Executive Board would meet today (Wednesday) in Washington to consider Pakistan’s request for $6 billion Extended Fund Facility (EFF). The IMF Executive Board calendar updated on its website showed that its meeting has been scheduled for July 3, and the agenda includes, ‘three-year extended fund facility’. Pakistan is hopeful that IMF would approve loan programme, as it has already met the Fund’s prior conditions.

The conditions included market based exchange rate, a raise in the discount rate and 0.6 percent primary deficit in budget for fiscal year 2019-20 and increasing in electricity and gas prices. “IMF may release first tranche in next few days, which could be around $500 million if it approves loan programme for Pakistan,” said an official of the ministry of finance. He further said that IMF programme would also pave way for getting loans from World Bank (WB) and Asian Development Bank (ADB). Pakistan is optimistic to receive $2-$3 billion from WB and ADB in ongoing fiscal year after IMF’s approval of loan programme. 

The government had planned to borrow almost $20 billion in shape of loans and grants from multilateral donors as well as foreign countries during the current fiscal year. The government has estimated foreign loan of Rs3.032 trillion (around $20 billion) for 2019-20 as against revised Rs1.403 trillion. The government’s external loan would show an increase of 116 percent in next fiscal year. Similarly, the country would avail the oil facility provided by Saudi Arabia worth $3.2 billion per year for three years, which became operational on July 1. Similarly, the Islamic Development Bank had also provided $1.2 billion deferred oil facility to Pakistan.

In October 2018, Pakistan had formally approached International Monetary Fund (IMF) for bailout package to avert the balance of payment crisis. Pakistan and IMF had started talks for the loan programme in November last year, which ended inconclusively after Islamabad refused to accept conditions like depreciating currency, increasing taxes and electricity tariff. However, the talks were continued through video-link in which Islamabad had started accepting IMF’s conditions. Later, an IMF mission led by Ernesto Ramirez Rigo visited Pakistan from April 29 to May 11, to discuss IMF support for the authorities’ economic reform programme. Pakistan and IMF had reached on staff level agreement on May 12. The IMF had set tough conditions for Pakistan, which were supposed to complete before its executive board meeting. Pakistan had met all of the conditions. The government had not intervened in market to control the value of currency as it did in the past.

 The Economic Coordination Committee (ECC) of the Cabinet had approved in principle up to 191 per cent increase in gas price. The government has also given approval to increase the electricity price by Rs1.5 per unit. However, there would be no increase for the domestic consumers using up to 300 units per month. Pakistan in staff level agreement with IMF had agreed to increase the prices of gas and electricity to reduce the soaring circular debt and losses. As per plan, the government would increase the power tariff by Rs2.60 per unit in two stages, enhancing the tariff to Rs 15.58 per unit from existing rates of Rs 12.98 per unit. Sources said that government would further increase the power prices in next few months. The SBP had already increased the key interest rate by 150 basis points to a 91-month (nearly eight-year) high at 12.25 percent in anticipation of acceleration of inflation under the IMF loan programme.

 The government had agreed to increase the key interest rate by two percentage points under the 39-month IMF loan programme worth $6 billion. Accordingly, the latest rate hike was a must to get IMF board’s final approval for the loan.