Satisfied with progress: IMF approves second $550m loan for Pakistan

Release of third tranche of $550m in March, 2014 will be dependent on January, 2014 review.

ISLAMABD: The Executive Board of the International Monetary Fund on Thursday approved the second tranche of $550 million loan for Pakistan, noting that the country was broadly on track with reforms tied to the $6.7 billion loan package.

The Executive Board of the IMF, which met in Washington, showed leniency and granted waiver to Pakistan as the government could not fulfil one condition relating to the Net International Reserves target of the first quarter of the fiscal year 2013-14. Without granting the waiver, approval of the first review and the second loan tranche of $550 million were impossible.

The leniency is believed to be based on the IMF team’s visit to Pakistan from October 28 to November 8. During its visit the team had held talks with top officials of the finance ministry and State Bank of Pakistan (SBP) as it completed the first review of the three-year Extended Fund Facility (EFF).

IMF had approved $6.7 billion loan for Pakistan in September this year and released the first tranche of $547 million. Future payments are dependent on the completion of tough economic reforms measured at quarterly reviews by the IMF staff.

The second review of the IMF programme is scheduled to take place in January. The release of the third tranche of $550 million in March is dependent on this revew.

While talking to The Express Tribune, Finance Minister Ishaq Dar said that the government did its best in implementing the reforms agreed with the IMF. He said the second tranche was expected to be disbursed by the IMF on the next working day.

With $550 million IMF loan, Pakistan’s reserves would be boosted above $4 billion mark. The reserves had fallen dangerously low. Chunks of heavy repayments to the IMF saw reserves dip below $2.9 billion last month.

Despite the signs of economic stress, Finance Secretary Dr Waqar Masood insisted that Pakistan was on course of putting the economy back on track and that the government would not divert from its path of reforms.

The federal government had proudly claimed an early victory last week where it claimed the economy was growing at a pace of 5 per cent in the first quarter of the current fiscal year.