Pakistan and the International Monetary Fund (IMF) are working together closely to bring the second review of a $6 billion three-year Extended Fund Facility (EFF) to a positive conclusion, Arab News reported a top IMF official on Saturday.
Pakistan signed the $6 billion three-year EFF with the IMF in 2019 and has received $1.44 billion under the loan program since July 2019. Another tranche of about $450 million was expected in March 2020, which has been put on hold until after the second review.
“The IMF team and Pakistani authorities remain closely engaged with a view to bring the second review of the EFF to a positive conclusion,” Teresa Dabán Sanchez, Resident Representative of IMF in Pakistan, told Arab News.
In April 2020, the country received $1.39 billion from the IMF under a Rapid Financing Instrument (RFI) to meet its balance of payment needs stemming from the coronavirus outbreak.
In June, Finance Adviser Dr. Abdul Hafeez Shaikh denied that Pakistan was planning to renegotiate the $6 billion loan program, and said that Pakistan would seek to factor in the economic impact of the coronavirus crisis into the targets of the IMF bailout program.
“Changing ground realities due to the coronavirus COVID-19 crisis need to be factored in with EFF program targets,” Sheikh spoke to the publication Arab News.
In September, the State Bank of Pakistan Governor Dr. Reza Baqir said that the IMF and Pakistan were engaged in a ‘technical discussion’. The tax rationalization and energy prices’ surge for the elimination of circular debt and new legislations are the key demands of IMF for the release of the next tranche.
State Bank of Pakistan forecasts that economic growth will recover to slightly above 2 percent in the current fiscal year (FY21), after falling to negative 0.4 percent last year.
The recovery is expected to be driven mainly by manufacturing-related activities and construction sector. However, according to the World Bank, Pakistan’s GDP will grow by 0.5 percent, according to the bank’s flagship report on South Asian economies released earlier in October.