Nusa Dua, Indonesia, July 14 (BNA): The International Monetary Fund announced Thursday that it has reached a staff-level agreement with Pakistan that would pave the way for the disbursement of $1.17 billion, if approved by the IMF board. He was thinking of taking over the show.
In a statement, the IMF said its staff had reached an agreement on policies as part of a review of the Extended Fund Facility (EFF) program that could raise total payments under the program to about $4.2 billion, if approved, Reuters reports.
This breakthrough may be timely, as rising energy import prices have pushed Pakistan to the brink of a balance of payments crisis.
Its foreign exchange reserves fell to $9.8 billion, barely enough for five weeks of imports, and the Pakistani rupee weakened to record lows against the US dollar.
“The agreement with the IMF paved the way to get the country out of economic difficulties,” Prime Minister Shahbaz Sharif said in a tweet on Twitter.
Finance Minister Muftah Ismail said in a tweet on Twitter that Pakistan “will soon receive $1.17 billion as the seventh and eighth tranches” of the programme.
Pakistan entered into a 39-month, $6 billion IMF program in 2019, but less than half of the amount has been disbursed so far as Islamabad struggles to keep targets on track.
In order to meet Pakistan’s larger financing needs, the IMF statement said that its board of directors will also consider extending the IMF until the end of June 2023, and whether to raise it by about $1 billion.
The return to the IMF program should also open up other external financing avenues for Pakistan.
Having come to power just two months ago, the government of Prime Minister Shahbaz Sharif has been tasked with reducing the fiscal and current account deficits under the IMF programme.
The central bank has already raised the policy interest rate to 15% to counter inflation, which reached 21.3% in June.
“Pakistan is going through a difficult economic juncture,” Nathan Porter, who led the IMF team, said in a statement, citing the difficult external environment and domestic policies that had pushed demand to unsustainable levels.
He added, “The resulting economic exhaustion led to large fiscal and external deficits in fiscal year 22, and contributed to the rise in inflation, and the erosion of protective reserves.”
Porter said agreed policy priorities include consistent implementation of the fiscal 2023 budget, which aims to reduce the government’s large borrowing needs and increase revenue by targeting high-income taxpayers, while protecting development spending.
“Thank God, we will fulfill all international obligations, including those made with the International Monetary Fund,” Finance Minister Ismail told Geo TV late on Wednesday night.
“We have put limits on expenditures,” he said.
The new government withdrew the unfunded support provided by former Prime Minister, Imran Khan, to the oil and energy sectors during his last days in office. On July 1, it also imposed a tax on petroleum that will raise prices by about 70% within a month.