ISLAMABAD: In a major sign of relief, the International Monetary Fund (IMF) has agreed to allow Pakistan to utilise $2.78 billion, equivalent to Rs500 billion, to meet its budgetary side requirements, which were provided to it to combat the COVID-19 pandemic.
The IMF usually provides Balance of Payment (BoP) support to recipient countries, but in special cases, it allows countries to utilise its resources to finance budgetary requirements as well.
Upon the request made by Pakistan, the IMF agreed in principle, and an announcement for it is expected along with the approval of the $1 billion tranche under the pending sixth review of an Extended Fund Facility (EFF). The commercial banks are eyeing to provide T-bills financing at higher rates, so the provision of budgetary support of Rs500 billion will spoil dreams of earning lofty profits.
“The Ministry of Finance has made a request to the IMF to allow utilisation of $2.78 billion windows provided to fight the COVID-19 pandemic for the purpose of meeting financing of budgetary requirements,” top official sources confirmed while talking to The News on Tuesday and indicated that the Fund staff had agreed to extend this major favour to Pakistan.
Pakistan had received $2.78 billion from the IMF under the Special Drawing Rights Program as the Fund announced $650 billion programmes for low-income countries severely hit by the pandemic.
Staff-level agreement with IMF
Official sources said that the IMF shared an initial draft of the Memorandum of Financial and Economic Policies (MEFP) with Pakistan and Islamabad sought some explanations before reaching a staff-level agreement.
The IMF requires political support from the highest office of the country to get assurances that all IMF conditions will be implemented in true letter and spirit.
The tough part of the negotiations with the IMF mainly related to fiscal adjustments and it took more time to evolve a consensus on the pace of adjustments.
The incumbent secretary of finance took a tough stance on certain occasions where he was able to fully grasp the issue. “I can say that he proved his mettle and proved to be a tough negotiator,” one of his close aides commented while talking to this scribe.
The official sources shared that all things were almost finalised and a staff-level agreement with the IMF was expected soon.
However, the Ministry of Finance has decided they will not issue any press statement and will give their response only after the issuance of a statement from the IMF side.
There is a need to finalise a staff-level agreement with the IMF to remove uncertainties because lingering confusion is causing consistent depreciation of the rupee against the US dollar.