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Economy

IMF earmarks Rs200bn spending waiver for Pakistan to curb Covid

The International Monetary Fund (IMF) has earmarked Rs200 billion spending waiver for Pakistan to fight against the coronavirus in the country. The amount is half of what remains in the Prime Minister’s Covid-19 Relief Fund 2020.

The sources in the Ministry of Finance said over Rs200 billion fiscal adjuster is part of the staff-level arrangement agreed between Pakistan and the IMF this month. The agreement is subject to the approval of the IMF Executive Board that may meet this month, provided Pakistan fulfils all the agreed actions.

IMF had also said, in its February handout, that Pakistan’s fiscal strategy remained anchored by the sustainable primary deficit of FY2021 budget. The strategy allowed for higher-than-expected Covid-related and social spending to minimize the short-term impact on growth and the most vulnerable people.

Previously, IMF had disbursed $1.4 billion emergency relief to provide fiscal space to Pakistan after the spread of the disease.

The IMF has made some adjustments in Pakistan’s fiscal targets due to Rs200bn waiver. the IMF has shown Rs578 billion development spending in this fiscal as against Rs650 billion budget and there are no changes in the defense and development spending this fiscal year.

The sources say the debt spending is expected to remain around Rs100bn.

The Ministry of Finance’s in the mid-term report said,

“The half-year fiscal position indicates that it will remain on track to meet the annual fiscal targets.”

The report said there is an understanding between IMF and Pakistan that the government may book a budget deficit of more than 7.1% of GDP this may not be reflected in the Memorandum of Economic and Financial Policies (MEFP) document.

Prime Minister had allocated Rs200 billion for daily-wagers but the actual disbursements remained at just Rs17 billion or 8.5% of the allocated amount, the report showed.

Similarly, the government had allocated Rs50 billion for providing subsidised goods at the state-owned Utility Stories and the actual spending was just Rs10 billion.

The government had also allocated Rs100 billion to provide temporary relief in electricity bills but the report showed disbursements remained at only Rs23 billion. The UK Aid-funded report showed another Rs33 billion disbursements were in process.

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