An agreement has been reached between the International Monetary Fund and Pakistan for an economic measures agreement, the completion of which will release ملک 500 million to the country.
The IMF said in a statement on Tuesday that this would be the second to fifth review of the Economic Reform Program in collaboration with the Extended Fund Facility (EFF).
According to the statement: “Pending Executive Board approval, سے 500 million will be released upon completion of the review.”
The statement said that the IMF team had virtual talks with Pakistani officials and reached an agreement at the staff level today.
To begin discussions on the second review of the Economic Reform Program, a team led by Mission Chief for Pakistan Ernesto Ramirez Ragu visited Islamabad February 3-13.
Earlier, 39 months of EFF arrangements for SDR 4,268 million (approximately US 6 6 billion) were approved by the first executive board.
Covid-19 and its economic effects
“Prior to the COVID-19 shock, the policies and reforms implemented by the Pakistani authorities had begun to reduce economic imbalances and set the conditions for improving economic performance,” Ryogo was quoted as saying. Most of the goals under the EFF-supported program were on track. “
“However, the epidemic has hampered these improvements and the authorities need to change their priorities in saving lives and supporting domestic and business enterprises,” the IMF chief said.
He said Pakistan’s response was achieved with the help of “fiscal year and fiscal policy benefits in the first nine months of fiscal 2020”.
“In addition to health control measures, this includes temporary financial stimulus, a major expansion of the social security network, fiscal policy support and targeted fiscal measures,” the statement said.
It observed that “there has been widespread support from the international community for emergency financing initiatives, including the Fund’s Rapid Financing Instrument (RFI).”
The IMF statement said that Pakistan’s first COVID-19 wave began to subside in the summer of 2020, after which “due to higher-than-expected remittances, import compression and light export exports” Account improved.
It says “high-frequency economic data” also began to show that recovery was revolutionary.
COVID-19 Adjustment in Pakistan’s policy due to ‘shock’
The Fund said that with the “shock” of COVID-19, Pakistan had to carefully recover the “macroeconomic policy mix, reform calendar, and EFF review schedule”.
“Against this backdrop, authorities have developed a package of measures that strikes the right balance between supporting the economy, ensuring debt stability and advancing structural reforms,” the statement said.
It noted that the country’s fiscal strategy is “at a sustainable core budget deficit for fiscal year 2021” and that it is more than expected to reduce the short-term effects of COVID-related and social spending growth and short-term risks. Allows. “
The IMF said the economic targets included “careful tax management and corporate tax reform to improve revenue and make it more transparent.”
“The power sector strategy aims to reduce social and sectoral impacts through financial stabilization, administrative reform, cost reduction, and adjustments in tariffs and subsidies,” the statement added.
The role of the SBP in navigating the quaid-affected economy
The IMF commended the role of the State Bank of Pakistan in tackling the COVID-affected economy, saying that the monetary and exchange rate policies are “in the good service of Pakistan and they are in the midst of the COVID-19 shock.” Are important in helping. “
“Strong international reserves position since the launch of the program. By January-January 2021, total reserves have almost doubled to US 13 13 billion, and by December 2020, net international reserves (NIRs) have exceeded US 9 9 billion “Market-based exchange rates have offered the SBP greater monetary policy easing and a significant expansion of financing facilities.”
The International Monetary Fund (IMF) has said that although the banking system is “healthy”, the SBP needs to be vigilant “and prevent potential economic stability tensions as the temporary relief phase is over.”
He added, “International reserves have been established to further improve the current account, revive the EFF, and further support international partners.”
Improvements in other areas
The IMF acknowledged that authorities were “steadily advancing on a number of other important reforms”.
These include strengthening the legal framework of regulatory agencies (NEPRA and OGRA Act), strengthening the autonomy of the State Bank (SBP Act), and the management of state-owned enterprises (SOEs). Improving.
“In addition, they have tested the SOE, and are moving forward with an audit of contracts awarded for Covid 19-related costs,” the IMF said.
It also states that Pakistan continues to enhance the effectiveness of the Anti-Money Laundering / Anti-Financing of Terrorism (AML / CFT) framework and in collaboration with the Financial Action Task Force (FATF). Progress is being made in completing the action plan.
The IMF said that in view of these improvements, the economy is projected to grow by 1.5% in FY2021, up from -0.4% in FY20.
But the second wave of COVID-19 is still spreading around the world, “the approach is subject to high levels of uncertainty and negative risks.”