Pakistan and the International Monetary Fund have successfully concluded talks for the eighth economic review under Extended Fund Facility that would pave way for releasing ninth tranche worth of $502 million in the next couple of months.
The IMF has accepted granting waivers on some of the economic targets, which were missed by Pakistan during previous financial year 2014-15. According to a private TV channel, the IMF granted Pakistan waivers on key conditions of reducing the budget deficit and lowering borrowings from the central bank, AAP reported.
The government had missed performance criteria on the budget deficit and government borrowing from the State Bank of Pakistan by the end-June 2015. In addition, the indicative targets on tax revenue and accumulation of circular debt deviated from end-June 2015 program targets.
An IMF staff mission, led by Harald Finger, visited Dubai during July 29-August 7, 2015 conducted discussions on the eighth review of Pakistan’s economic program supported by a three-year IMF Extended Fund Facility arrangement. The staff team met with Finance Minister Ishaq Dar, SBP Governor Ashraf Wathra and other officials.
Economy Improving
“Pakistan’s economy continues to improve. Real GDP growth is expected to increase to 4.5% this fiscal year, helped by macroeconomic stability, low oil prices, planned improvements in the domestic energy supply and investment related to the China-Pakistan Economic Corridor.
Inflation dropped to 1.8% in July, but is expected to increase in the coming months with the anticipated stabilization of commodity prices. Despite declining exports, the external current account deficit narrowed to 0.8% of GDP in FY 2014/15 owing to favorable oil prices and strong growth of remittances.
Foreign exchange reserves of the SBP continued to increase at a healthy pace, and reached $13.5 billion at end-June 2015, covering three months of imports”, IMF mission chief stated in a statement.
He further said, “In the period ahead, consolidating these gains and focusing the reform efforts on overcoming structural challenges still facing Pakistan will be important to achieve higher exports, investment, jobs, and growth.
“In this context, we welcome the authorities’ plans to continue strengthening public finances and external reserve buffers, and to accelerate efforts to widen the tax net to create space for infrastructure investment and social assistance.
“In addition, efforts continue to restructure loss-making public enterprises, including through strategic partnerships with the private sector, advance the energy sector reform, improve the business climate, and further expand coverage under BISP to protect the most vulnerable. Decisive progress in these areas will help strengthen competitiveness and resilience of the economy and transform Pakistan into a dynamic emerging market economy”.
Addressing the media in Dubai, Finance Minister Ishaq Dar said that Pakistan and IMF have successfully completed negotiations on the Eighth Review, which will lead to release of ninth tranche of over $502 million. “We met end-June 2015 Quantitative Performance Criteria on the SBP’s Net International Reserves, Net Domestic Assets, and foreign currency swap/ forward position and the indicative target on power sector payment arrears”, he added.
