ISLAMABAD: The International Monetary Fund has overlooked completely the conspiracy of the PTI to block the resumption of loan programme at the eleventh hour.
PTI finance ministers in Punjab and Khyber Pakhtunkhwa wrote separate letters to the IMF with a clear-cut message that the provincial governments would not fulfill their agreements with the fund signed before the floods.
The executive board of the fund ignored it and approved $1.1 billion for Pakistan.
Meanwhile, the fund had also set aside two key demands of the coalition government. The government demanded an extension in the IMF programme for two years _ till June 2024, but the board of the fund extended the duration of the loan to June 2023 only.
In other words, after June 2023, Pakistan will, once again, be facing a default-like situation. Similarly, the government demanded an increase in the amount of IMF to $8 billion, but the board incorporated a paltry increase of $500 million and enhanced the size of the loan to $6.5 billion.
IMF Press Statement about loan for Pakistan
According to the IMF, the decision of the board allows for an immediate disbursement of SDR 894 million (about US$1.1 billion), bringing total purchases for budget support under the arrangement to about US$3.9 billion.
The EFF was approved by the Executive Board on July 3, 2019, for SDR 4,268 million (about US$6 billion at the time of approval, or 210 percent of the quota). In order to support program implementation and meet the higher financing needs in FY23, as well as catalyze additional financing, the IMF Board approved an extension of the EFF until end-June 2023, rephasing and augmentation of access by SDR 720 million that will bring the total access under the EFF to about US$6.5 billion.
Pakistan is at a challenging economic juncture. A difficult external environment combined with procyclical domestic policies fueled domestic demand to unsustainable levels. The resultant economic overheating led to large fiscal and external deficits in FY22, contributing to rising inflation; and eroded reserve buffers. The programme seeks to address domestic and external imbalances and ensure fiscal discipline and debt sustainability while protecting social spending, safeguarding monetary and financial stability, maintaining a market-determined exchange rate and rebuilding external buffers.
