IMF set to approve second tranche of $450 million to Pakistan
ISLAMABAD – The International Monetary Fund (IMF) would likely to approve second tranche worth of $450 million for Pakistan in next month that would increase the country’s foreign exchange reserves.
The executive board of the IMF would likely to meet in early next month (December) to consider approving second tranche for Pakistan. The IMF had visited Islamabad for the first review under extended fund facility (EFF) from October 28 to November 8 wherein it showed satisfaction over the economic performance of the country. The IMF praised to authorities for over-performing on first quarter targets that has pave the disbursement of $450 million.
The IMF in July this year had approved a three-year, $6 billion loan to support Pakistan’s economic plan. Pakistan had already received an upfront disbursement of $991 million on completion of all prior actions committed by Pakistan before signing the fund programme.
Pakistan had already decided to fulfil one of the remaining demands of the IMF by introducing another electricity tariff hike before the executive directors of the IMF.
According to the news report, 10 distribution companies (Discos) of ex-Wapda had sought Rs17.2 billion additional revenue generations through an average price increase of about 18 paisa per unit.
The average electricity tariff would increase to about Rs13.69 per unit, excluding general sales tax and some other taxes and duties, from the current rate of Rs13.51 per unit.
The inflow of second tranche from IMF would build the country’s foreign exchange reserves of the country. The country’s foreign exchange reserves have currently recorded at $15.5 billion wherein State Bank of Pakistan reserves are $8.4 billion.
The country’s foreign exchange reserves have increased by $1.2 billion to $8.4 billion in four months (July to October) of the current fiscal year. Similarly, the government had paid $2.1 billion as against previous loans during four months. The IMF after first economic review said despite a difficult environment, program implementation has been good, and all performance criteria for end-September were met with comfortable margins.
Work continues towards completing the remaining structural benchmarks for end-September. Significant progress has been made in improving the AML/CFT framework, although additional work is needed before March 2020. International partners remain committed to supporting the authorities’ reform efforts, providing the necessary financing assurances.
According to the IMF, on the macroeconomic front, signs that economic stability is gradually taking hold are steadily emerging. The external position is strengthening, underpinned by an orderly transition to a flexible, market-determined exchange rate by the State Bank of Pakistan (SBP) and a higher-than-expected increase in SBP’s net international reserves.
Budgetary revenue collections are growing on the back of efforts on tax administration and policy changes, and despite the ongoing compression in import-related taxes. Inflation pressures are expected to recede soon, reflecting an appropriate monetary stance.
Importantly, measures to strengthen the social safety net are being implemented, and development spending is been prioritised.