Pakistan and the International Monetary Fund (IMF) on Tuesday reached an agreement to revive the stalled $6 billion programme after Islamabad agreed to rationalise expenditures, increase electricity prices and to slap additional taxes.
The agreement, subject to the approval of the IMF board, would pave the way for release of $500 million third loan tranche.
“The IMF staff and the Pakistani authorities have reached an agreement on a package of measures to complete second to fifth reviews of the authorities’ reform programme,” according to a statement issued by the IMF from Washington.
An IMF team led by Ernesto Ramirez Rigo, concluded virtual discussions with the Pakistani authorities and reached a staff-level agreement to club four pending reviews and then make a request for release of $500 million tranche, subject to implementation of certain conditions.
The $6 billion programme was on hold since January last year after Prime Minister Imran Khan refused to increase electricity prices and slap additional taxes. However, the government has now agreed to take these measures between February to May this year. Some of the measures including increasing energy prices have already been taken.
The government of Pakistan has reached a staff level agreement with the IMF, Finance Minister Dr Abdul Hafeez Shaikh also tweeted after the IMF press statement.
(2/2) I would like to thank the Prime Minister for his guidance, and all my colleagues and the IMF staff for their support. This is a good development for Pakistan. https://t.co/UAF7nhn4O1— Dr. Abdul Hafeez Shaikh (@a_hafeezshaikh) February 16, 2021
The IMF said that the package strikes an appropriate balance between supporting the economy, ensuring debt sustainability, and advancing structural reform.
“Pending approval of the Executive Board, the reviews’ completion would release around $500 million”, said the IMF.
Out of the $6 billion, the IMF has already disbursed $1.45 billion in two tranches.
Both the sides have agreed to club the pending second, third, fourth and fifth reviews of the programme.
The separate completion of these reviews would have led to disbursements of $2.2 billion, which the IMF has now reduced to just $500 million.
The IMF board is expected to meet next month to approve the agreement.