An IMF statement says a ‘staff-level deal’ – which is still subject to board approval – will bring the amount distributed under a financing facility to $4.2 billion. Extended (EFF) which could increase to $7 billion and extend through next June. year. ― Reuters file photo
Thursday July 14, 2022 11:38 MYT
ISLAMABAD, July 14 ― The International Monetary Fund (IMF) today announced that it has agreed with Pakistan to resume a suspended lending program that will inject $1.17 billion (RM5.2 billion) into the troubled economy.
An IMF statement says a ‘staff-level deal’ – which is still subject to board approval – will bring the amount distributed under a financing facility to $4.2 billion. Extended (EFF) which could increase to $7 billion and extend through next June. year.
An initial US$6 billion bailout was signed by former Prime Minister Imran Khan in 2019 but repeatedly stalled when his government reneged on grant deals and failed to improve significantly the collection of taxes.
The new deal follows months of deeply unpopular restrictions by the government of Shehbaz Sharif, which took power in April and effectively eliminated fuel subsidies and introduced new measures to broaden the tax base.
“Pakistan finds itself in difficult economic times,” Nathan Porter, who led the IMF team, said in a statement, adding that external factors and domestic policies were to blame.
Pakistan desperately needs international support for its economy, which is suffering from poor revenue collection and dwindling foreign exchange reserves to pay its crippling debt.
The new government has cut a series of subsidies to meet demands from global financial institutions, but risks the wrath of an electorate already struggling with the brunt of double-digit inflation.
A new coalition government – which came to power after Khan was ousted in a parliamentary no-confidence vote – said it would make the tough decisions needed to turn the economy around.
Successive administrations blame their predecessors for the country’s economic woes, but analysts say the malaise stems from decades of mismanagement and a failure to tackle rampant corruption and widespread tax evasion.
In a bid to secure the IMF loan, Prime Minister Sharif imposed three fuel price hikes ― totaling 50% in total ― and increased the cost of electricity to end the subsidies introduced by Khan.
Islamabad has so far received $3 billion from the program, but with the facility due to end later this year, officials have asked for an extension until June 2023.
“It has become essential to resume the IMF program to save the country from default,” Finance Minister Miftah Ismail told the National Assembly last month.
“We knew it would damage our political reputation, but we did it anyway.”
The last budget earmarked 3.95 trillion rupees just to service the country’s huge debt of $128 billion.
The agreed policy priorities included resolute implementation of the budget, the IMF’s Porter said in the statement.
Pakistan also agreed to continue power sector reforms, introduce a proactive monetary policy to fight inflation, strengthen governance, tackle corruption and improve the social safety net.
“The authorities should nevertheless stand ready to take any additional measures necessary to achieve the objectives of the program, given the elevated uncertainty in the global economy and financial markets,” the statement added. -AFP