Pakistan reaches agreement with IMF after months of discussions; to get USD 6 billion over 3 yrs
After months of discussions and negotiations, cash-strapped Pakistan reached an agreement with the International Monetary Fund on a bailout package on Sunday, under which it will receive USD 6 billion over three years,
- Pakistan will receive USD 6 billion over three years
- Islamabad will also receive $2-3 billion from World Bank, ADB and others
- The programme aims to support the authorities’ strategy for stronger and more balanced growth
While making the announcement on state-run PTV News, Shaikh said that a staff-level agreement has been reached between Pakistan and the IMF and that Pakistan would receive dollar 6 billion worth of assistance under the IMF programme over a period of three years, Dawn reported.
The staff-level agreement now awaits a formal approval by the International Monetary Fund (IMF) board of directors in Washington, it said.
Islamabad will also receive $2-3 billion from World Bank, ADB and others, the report said.
An International Monetary Fund (IMF) mission led by Ernesto Ramirez Rigo visited Islamabad from April 29 to May 11 to discuss IMF support for the authorities’ economic reform program.
“This agreement is subject to IMF management approval and to approval by the Executive Board, subject to the timely implementation of prior actions and confirmation of international partners’ financial commitments,” Ramirez Rigo stated.
“The programme aims to support the authorities’ strategy for stronger and more balanced growth by reducing domestic and external imbalances, improving the business environment, strengthening institutions, increasing transparency, and protecting social spending,” he said.
Ramirez Rigo said: “Pakistan is facing a challenging economic environment, with lackluster growth, elevated inflation, high indebtedness, and a weak external position. This reflects the legacy of uneven and procyclical economic policies in recent years aiming to boost growth, but at the expense of rising vulnerabilities and lingering structural and institutional weaknesses”.
“The authorities recognize the need to address these challenges, as well as to tackle the large informality in the economy, the low spending in human capital, and poverty,” he said.
The agreement was reached after marathon talks which started on April 29. Initially the agreement was expected to be made by May 7 but it was delayed until May 10. The final outcome was further delayed after Prime Minister Imran Khan objected to some of the stringent conditions by the IMF. The talks were extended to continue over the weekend and were capped on Sunday.
Earlier, the Pakistan government was ambivalent about the IMF package due to the expected tough conditions.
The finance ministry approached the IMF in August 2018 for a bailout package when the Imran Khan government took over.
Khan changed the entire economic team including the finance minister, chief of State Bank of Pakistan (SBP) and head of Federal Bureau of Revenue (FBR) under criticism for failure to improve the economy.
The new team included Shaikh who is the de-facto finance minister and appointment of Dr Reza Baqir as Governor of the SBP, while a known tax consultant Shabbar Zaidi was made as chairman of the FBR.
Baqir was serving as the IMF country head in Egypt before moving to Pakistan. He would be one of the two signatories along with Shaikh on the final agreement with the IMF.
It led Opposition to denounce the talks as "IMF versus IMF" to secure a deal that would favour the IMF.
Experts have warned that the package will bring a tsunami of economic hardships for common people, including high prices of good and utilities including gas and electricity, more increase in fuel prices and further devaluation of rupee.
The latest deal would be the 22nd bailout package since Pakistan became member of the IMF in 1950.
(additional inputs from PTI)
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