IMF approves $2.3billion aid package for Pakistan
The Executive Board of the International Monetary Fund (IMF) on Friday approved two packages worth $2.3 billion, including a new $1.3 billion programme despite India’s unsuccessful move to block during the Executive Board meeting.
The international lender approved $1billion worth second loan tranche of the Extended Fund Facility and sanctioned new $1.3 billion Resilience and Sustainability Facility (RSF).
Pakistan’s Secretary Finance Imdad Ullah Bosal and Finance Minister Muhammad Aurangzeb worked hard to keep the programme on track after initial setbacks.
The IMF would immediately release the $1 billion second loan tranche under the EFF while the $1.3 billion would be disbursed over a period of next 28 months. With the approval of the $1 billion second tranche due to Pakistan’s better fiscal performance, the total disbursements under the EFF would reach to $2.1 billion.
India undertook an unwise move to block the approval despite having only 2.7pc voting rights, the second defeat in less than 72 hours after losing five fighter jets to superior Pakistan Air Force.
The deals were reached after both sides made some adjustments in the 25th Extended Fund Facility (EFF), including lowering tax target in absolute terms, setting a new deadline to trim the Pakistan Sovereign Wealth Fund and open economy to foreign companies.
Pakistan will also impose carbon levy as part of the conditions of the new $1.3 billion programme with effect from July this year and increase water usage charges from next year as part of the conditions for the new Islamabad also reluctantly agreed to commence the study for phasing out the existing Special Economic Zones (SEZs) by 2035.
About two months ago, an IMF team had reached a staff-level agreement with the Pakistani authorities on the first review of the 37-month Extended Arrangement under the EFF, and on a new 28-month arrangement under the IMF’s Resilience and Sustainability Facility (RSF) with total access over the 28 months of around $1.3 billion.