Saul Loeb—AFP
The disbursement under Rapid Financing Instrument is not subject to any reform program
The International Monetary Fund (IMF) on Thursday approved the disbursement of $1.386 billion to Pakistan under the Rapid Financing Instrument (RFI) to address the economic impact of the movement restrictions necessitated to curb the spread of COVID-19.
“The Executive Board of the IMF approved a purchase of Pakistan under the RFI equivalent to SDR 1,015.5 million ($1.386 billion, 50 percent of quota) to meet the urgent balance of payments needs stemming from the outbreak of the COVID-19 pandemic,” the fund said in a statement. “While uncertainty remains high, the near-term economic impact of COVID-19 is expected to be significant, giving rise to large fiscal and external financing needs,” it added.
“The domestic containment measures, coupled with the global downturn, are severely affecting growth and straining external financing,” said Geoffrey Okamoto, the IMF’s deputy managing director. “This has created an urgent balance of payments need,” he said.
Pakistan has recorded around 125 deaths due to the coronavirus, but experts have warned that a rapid spread of the virus in the country of 220 million could very shortly overwhelm its healthcare infrastructure and lead to mass deaths. Prime Minister Imran Khan has repeatedly come out against lockdowns, opting instead to reopen ‘low risk’ industries by announcing exemptions for them while maintaining closures of schools, restaurants, and shopping malls.
The IMF’s Okamoto praised the actions taken by Pakistan thus far to prepare for a worsening crisis. “In response to the crisis, the Government of Pakistan has taken swift action to halt the community spread of the virus and introduced an economic stimulus package aimed at accommodating the spending needed to tackle the health emergency and supporting economic activity. Crucially, the authorities are increasing public health spending and strengthening social safety net programs to provide immediate relief to the most vulnerable,” he said, adding the State Bank of Pakistan had also lowering its benchmark rate and supported liquidity.
The disbursal has been made under the RFI, which addresses emergencies and does not subject a country to a full-fledged reform program that undergoes review. Pakistan is already under a three-year, $6 billion program that was approved last year. “The IMF remains closely engaged with the Pakistani authorities and as the impact of the COVID-19 shock subsides will resume discussions as part of the current Extended Fund Facility,” the IMF statement added.
Earlier on Thursday, Foreign Minister Shah Mehmood Qureshi confirmed that the IMF had decided to grant one-year relief to Islamabad, from May 1, as the country battles to contain the spread of COVID-19. “Prime Minister Imran Khan had appealed to IMF for debt relief for developing countries which was accepted by the Fund,” he said. “IMF has announced it would give one-year relief to 70 developing nations, including Pakistan.”