Saul Loeb—AFP
Global fund completes first review of economic performance, approves disbursement of $452.2 million tranche
The International Monetary Fund on Thursday said Pakistan’s economic reforms program is on track, and has started to pay dividends.
The executive board of the global fund completed its first review of Pakistan’s economic performance under the $6 billion Extended Fund Facility, noting “decisive policy implementation” by authorities had helped preserve economic stability in the country. Following the successful completion of the review, Pakistan will be disbursed the second tranche of $452.4 million, bringing to $1.44 billion the total amount availed by Islamabad thus far.
The IMF package, approved in July, is aimed at reviving Pakistan’s struggling economy through a periodic release of funds over a 39-month period—conditional on the government achieving the IMF’s policy guidelines.
In its press release, the IMF approvingly noted that the government’s transition to a market-determined currency exchange rate had been “orderly” and inflation resulting from the currency devaluation had started to stabilize. It said the ongoing stability process would help mitigate the impact of the devaluation on the most vulnerable groups of the population.
The global fund also appreciated Pakistan’s commitment to expanding social safety nets, reducing poverty and narrowing the gender gap.
However, despite the praise, the fund warned “risks remain elevated.” IMF’s First Deputy Managing Director and Acting Chair David Lipton said “strong ownership and steadfast reform implementation” were critical to ensuring macroeconomic stability” and would support “robust and balanced growth.”
According to Lipton, the authorities are “committed to sustaining the progress on fiscal adjustment to place debt on a downward path.” He praised the planned reforms, including strengthening tax revenue mobilization by eliminating tax exemptions and loopholes, and prudent expenditure policies. “Preparations for a comprehensive tax policy reform should start early to ensure timely implementation,” he advised.
The acting chair of the IMF also urged Islamabad to expedite the Anti-Money Laundering/Combating the Financing of Terrorism framework supported by “technical assistance from the IMF and other capacity development providers” so that Pakistan could speedily be removed from the Financial Action Task Force’s ‘grey list.’
Pakistan was placed on FATF’s grey list last year over failing to do enough to prevent terror financing. In October, the global watchdog gave the country four months to take stronger measures to combat terror financing and money laundering or risk being blacklisted, which would carry sanctions that could crippling for the economy.