Islamabad, Jul 14 (EFE).- The International Monetary Fund (IMF) reached an agreement on Thursday with the authorities of Pakistan for a $1.18 billion in the framework of negotiations with the financial entity for the reactivation of the $6 billion loan program.
Subject to approval by IMF Executive Board, “about $1,177 million (SDR 894 million) will become available, bringing total disbursements under the program to about $4.2 billion,” the agency said in a statement.
On the recommendation of a technical team that visited Pakistan, the IMF Board will also consider extending the program until the end of June 2023 and increasing the funds available to $7 billion.
According to the team, Pakistan is experiencing “a challenging economic juncture” which was driven by “a difficult external environment combined with procyclical domestic policies fueled domestic demand to unsustainable levels.”
These factors led the Pakistani economy to run a high fiscal and external deficit in the last fiscal year, contributing to rising inflation and eroding foreign-exchange reserves.
This situation was reflected in the sharp fall in the Pakistani rupee, which has touched historic lows in the last few months. On Thursday it stood at 209.55 units to the US dollar.
Adhering firmly to the budget for this fiscal year, presented last month, and catching up on electricity sector reforms, where debt threatens viability and frequent power outages, are two of the priorities identified by the IMF team.
The statement noted that other measures included the need to reduce inflation levels to 5-7 percent in the medium term – after it exceeded 20 percent in June -, reduce poverty, increase social security and strengthen governance.
“Steadfast implementation of the outlined policies (…) will help create the conditions for sustainable and more inclusive growth,” IMF said.
“The authorities should nonetheless stand ready to take any additional measures necessary to meet program objectives, given the elevated uncertainty in the global economy and financial markets,” it added.
The Government of Pakistan reached a $6 billion financial assistance agreement with the IMF in 2019, for disbursal over the next three years.
However, first the government of Imran Khan, and now that of Shehbaz Sharif, did not comply with all the conditions of the agreement for fear of unleashing public anger. EFE