Pakistan, IMF strike USD 6 billion bailout package deal
IMF will give the aforementioned amount to Pakistan during the course of three years.
Special Advisor to Prime Minister (SAPM) on Finance, Dr Abdul Hafez Shaikh—in an interview with state television—stated that Pakistan’s economic situation has remained terrible in the past few years.
“When this government [Pakistan Tehreek-e-Insaf] took over reins of the country, Pakistan has already taken loans worth Rs25000 billion. Likewise, exports grew by 0% in the past few years. As a matter of fact, exports had witnessed negative growth in past few years. ”, stated SAPM Hafeez Shaikh.
Shaikh added that current account deficit (CAD) stood at whooping $25 billion in the previous financial year whereas Foreign Exchange Reserves fell by 50pc to bleak $9 bln in the past two years.
— IMF (@IMFNews) May 12, 2019
“Owing to these [aforementioned financial stats] reasons, our financial needs were facing a deficit of USD 12 billion. Therefore, there was no choice apart from approaching IMF”, revealed SAPM.
The special advisor further stated that Pakistan will get an additional loan amounting to USD 2-3 billion from Asian Development Bank (ADB) and World Bank (WB).
“These loans will better our debt situation”, opined Hafeez Shaikh while adding, “The programme that we will adopt with IMF will send a positive signal to the whole world.”
Shaikh added that Pakistan will implement structural reforms under agreement with international-lending body. He said, “These structural reforms are in greater interest of Pakistan.”
He revealed that Rs250 billion will be earmarked in terms of electricity subsidy. In previous fiscal year, the government has allocated Rs200 billion for same.
Besides, Rs180 billion have been allocated for BISP in Fiscal Year 2019-20. In previous fiscal year, Rs100 billion were allocated for same.
It is pertinent to mention that it is the 23rd time Pakistan has approached IMF for a bailout package.
“The Pakistani authorities and the IMF team have reached a staff level agreement on economic policies that could be supported by a 39-month Extended Fund Arrangement (EFF) for about US$6 billion. 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. The program 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.
“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. In this regard, the government has already initiated a difficult, but necessary, adjustment to stabilize the economy, including thorough support from the State Bank of Pakistan. These efforts need to be strengthened. Decisive policies and reforms, together with significant external financing are necessary to reduce vulnerabilities faster, increase confidence, and put the economy back on a sustainable growth path, with stronger private sector activity and job creation", read the IMF press release.