IMF approves $500 million third tranche for Pakistan: Positive or negative development for the economy?
It should be noted that the tranche of $500 million is being released after agreement on the staff level agreement between Pakistan and the IMF, which was mutually agreed upon by both sides in the month of February this year.
A tranche of $500 million is being released to Pakistan under the Extended Fund Facility (EFF). The IMF and Pakistan signed an agreement in July 2019 that approved a six billion dollar IMF loan to Pakistan to support the country's external payments as well as sustainable economic growth. can go.
Under this program, Pakistan has received 1.5 billion dollars in two installments so far.
The IMF's current program with Pakistan was put on hold when in February last year, Pakistan asked to defer further hikes in power sector rates under IMF conditions until June, leading to The IMF could not conduct a second review of the program.
When the corona virus epidemic affected Pakistan like the rest of the world, further payments from the IMF were deferred under this program, but despite the suspension of this program, the IMF gave Pakistan a negative response to the corona virus. $1.4 billion was provided to protect against impacts that are not part of this program.
The restoration of the IMF program for Pakistan will increase the foreign exchange reserves of the country by 500 million dollars on the one hand, on the other hand, experts in the economy and industry and trade and related people are expressing concern about the conditions associated with it. Which according to them will seriously affect the economy of Pakistan.
Program Retention Terms
The resumption of the program by the IMF has certain conditions, including amendments to the prominent electricity laws, namely the NEPRA Act, amendments to the State Bank of Pakistan Act, levy of additional taxes and hike in electricity and gas rates. and ending subsidies to various sectors.
Pakistan's federal cabinet earlier this month approved amendments to the State Bank Act, which are part of the IMF's terms of reference, to give the central bank more autonomy.
In this regard, the federal government is bringing amendments to the State Bank Act through an Ordinance, as well as an Ordinance to abolish tax exemptions to collect additional taxes, which is part of the terms of the IMF. .
The federal cabinet has also approved an ordinance for amendments to the NEPRA Act and has also given approval to increase electricity rates by at least 5.65 per unit a few days ago.
How important is the recovery of the IMF program?
Growth in Pakistan's economy, which turned negative in the last financial year, has seen some signs of improvement in the last few months, but there are concerns about the negative impact on the economy due to the conditions associated with the recovery of the IMF program. Is.
Regarding why the revival of this program is necessary, the economist Muzamil Aslam said that Pakistan is an emerging country, but its resources are not enough to go beyond its own resources.
He said, 'Pakistan gets a loan from the IMF and this loan cannot be given without following the conditions.'
He said, "The restoration of the IFF program will encourage the confidence of international financial institutions and foreign investors in Pakistan and open new credit lines for Pakistan."
He said, "The restoration of the IMF program will help Pakistan to get out of the gray list of FATF as Pakistan will be able to gain the confidence of the international financial institutions through it."
According to Muzamil Aslam, if there are structural reforms in the economy through the IMF program, it will benefit the economy and employment opportunities will be created which will benefit the common man.
Former Vice Chancellor of Pakistan Institute of Developing Economics Dr. Rashid Amjad has said that Pakistan should complete this program and not leave it in the middle.
Commenting on the conditions of the IMF, he said that the IMF should also revise in this regard because the economy is suffering from a bad situation due to the corona virus.
He said that for the restoration of this program, negotiations with the IMF could have been done in a better way.
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