The International Monetary Fund (IMF) announced that a staff-level agreement has been reached with Pakistan on policies to complete the combined 7th and 8th reviews of Pakistan’s Extended Fund Facility (EFF). Nathan Porter, the IMF mission chief to Pakistan, said; “The IMF team has reached a staff-level agreement with the Pakistani authorities for the conclusion of the combined seventh and eighth reviews of the Extended Fund Facility [EFF]- supported programme.”
Pakistan and IMF have reached an agreement. We will soon receive $1.17b as the combined 7th & 8th tranche. I want to thank the PM, my fellow ministers, secretaries and especially the finance division for their help and efforts in obtaining this agreement. https://t.co/376sCHLc1Y
— Miftah Ismail (@MiftahIsmail) July 14, 2022
Staff-level Agreement is Subjected to the Executive Board’s Approval
The IMF mentioned that the staff-level agreement is subjected to approval by the IMF’s Executive Board and once it is approved a loan tranche of about $1.177 billion (SDR 894 million) will be released, bringing the total disbursements under the programme to about $4.2 billion. The statement reads; “Subject to Board approval, about $1,177 million (SDR 894 million) will become available, bringing total disbursements under the program to about $4.2 billion. Additionally, in order to support program implementation and meet the higher financing needs in FY23, as well as catalyze additional financing, the IMF Board will consider an extension of the EFF until end-June 2023 and an augmentation of access by SDR 720 million that will bring the total access under the EFF to about US$7 billion.”
IMF mission said that Pakistan is at a challenging economic juncture. A difficult external environment combined with procyclical domestic policies has fueled domestic demand to unsustainable levels. The statement further added that the resultant economic overheating led to large fiscal and external deficits in FY22, contributing to rising inflation, and eroded reserve buffers. It is pertinent to mention here that in order to resume the loan program, Pakistan has paid a heavy price in the shape of Rs249 per liter of petrol, and huge taxes on the salaried class to convince the global lender.
Read more: Petrol Prices in Pakistan Likely to Go Up Again By PKR 20
Pakistani Rupee Recovers
The Pakistani rupee recovered against the dollar as the news of the staff-level agreement broke. According to the State Bank of Pakistan (SBP), the local currency closed at 210.10 on Wednesday, having depreciated by 1.04%. Whereas, in the open market, the dollar slid by 50 paisas to hit Rs211. According to Pakistan-Kuwait Investment Company Head of Research, Samiullah Tariq; “The sentiment in the currency market has improved as refinancing risk has significantly reduced.”
