The International Monetary Fund board on Monday approved a $1.3 billion loan by granting waivers for missing a few core conditions and securing a fresh commitment from Pakistan to introduce new tax measures to offset the impact of a huge revenue shortfall.
To secure the IMF board meeting date, the Pakistani authorities had agreed to fulfill two prior actions – a guarantee to issue an order to restructure an undercapitalised bank and the publication of the Governance and Corruption Diagnostic Assessment report – the latter costing the government political capital. The global lender approved nearly $1.1 billion under the Extended Fund Facility (EFF) and another $220 million under the Resilience and Sustainability Facility (RSF), according to the decision that would keep the two loan programmes worth $8.4 billion on track. The Ministry of Finance had to face criticism from within, as it remained glued to the conditions agreed with the IMF. The bureaucracy of the Finance Ministry played a key role in keeping the programme on track.
The IMF’s programme has stabilised the economy, and the Finance Ministry showed the first primary budget surplus in years and halted the exponential increase in public debt. The prime minister has praised the performance of the economic team, particularly Finance Secretary Imdad Ullah Bosal. The $1.1 billion is the third tranche under the $7 billion economic stabilisation package, approved on the basis of Pakistan’s economic performance for the January-June period of the last fiscal year. But to pave the path for approval and continuation of the programme, the board accepted Pakistan’s request for waivers on missing some conditions for the end-June period and also relaxed at least three conditions for the next review. The IMF programme has brought economic stabilisation, but the structural reforms have yet to take root, even as the national coordinator of the Special Investment Facilitation Council calls for a growth plan. Government sources said the IMF board waived the quantitative performance criterion of spending Rs599 billion under the Benazir Income Support Programme, as the spending remained below target. However, the central bank overperformed on another condition of building net international reserves after buying $8.4 billion from the local market.