IMF Executive Board Completes the Twelfth and Final Review Under the Extended Fund Facility for Pakistan

IMF News, September 28, 2016

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Canonical URL: IMF Executive Board Completes the Twelfth and Final Review Under the Extended Fund Facility for Pakistan

The Executive Board of the IMF on September 28, 2016 completed the twelfth and final review of Pakistan’s three-year economic reform program supported by an Extended Fund Facility (EFF) arrangement.
The Board’s decision enables the immediate disbursement of the final tranche in an amount equivalent to SDR 73 million (about US$102.1 million).
On September 4, 2013, the Executive Board approved the 36-month extended arrangement under the EFF in the amount of SDR 4.393 billion (about US$6.15 billion, or 216 percent of Pakistan’s current quota at the IMF) (See Press Release No. 13/322).

The program “helped the country restore macroeconomic stability, reduce vulnerabilities, and make progress in tackling key structural challenges.”
Reported macroeconomic improvements and outcomes:
- Economic growth has gradually increased.
- Inflation has declined.
- External buffers have been bolstered.
- Financial sector resilience has been reinforced.
- The fiscal deficit has been reduced.
- Social safety nets have been strengthened.
- Tax policy and administration reforms allowed for further revenue mobilization.
- Steps have been taken to strengthen the State Bank of Pakistan’s autonomy.
- Energy sector reform allowed a reduction of power outages, energy subsidies, and accumulation of power sector arrears.
- A country-wide strategy to improve the business climate was adopted.

Energy sector:
- Reforms enabled a reduction of power outages, energy subsidies, and the accumulation of power sector arrears.
- Completing the power sector reform is identified as important to strengthen sector soundness and support growth.
Financial sector and central bank:
- Financial sector resilience was reinforced.
- Further progress on financial sector reforms will be important.
- Swiftly addressing the remaining recommendations of the 2013 Safeguards Assessment is needed to further strengthen the central bank’s autonomy.
Public enterprises and business climate:
- A country-wide strategy to improve the business climate was adopted.
- Restructuring and attracting private sector participation in public enterprises is needed to ensure their financial viability and reduce fiscal costs.
- Continuing implementation of the new business climate reform strategy will help increase competitiveness, foster investment, and support private-sector-led growth and job creation.

Significant challenges remain for Pakistan in the post-program period; authorities’ commitment to continue strong policies is commended.
Fiscal policy:
- In light of the significant public debt burden, the authorities’ plan to further reduce the fiscal deficit is welcome.
- The 2016/17 budget and the revised fiscal responsibility framework can anchor fiscal policy in support of further gradual fiscal consolidation.
External sector and monetary policy:
- Further accumulating international reserves in a context of sufficient exchange rate flexibility will help strengthen confidence and competitiveness.
- Maintaining a prudent monetary policy stance will be key to supporting low inflation and macroeconomic stability.
Governance and safeguards:
- Swiftly addressing the remaining recommendations of the 2013 Safeguards Assessment is needed to further strengthen the central bank’s autonomy.
Structural reform sequencing:
- Moving forward with key structural reforms is pivotal to foster higher and more inclusive growth.
- Restructuring public enterprises, completing power sector reform, and advancing the business climate agenda are highlighted priorities.

The IMF will continue close engagement with Pakistan through policy dialogue in the context of regular consultations and post-program monitoring, along with ongoing technical assistance.
Statement issued by Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, following the Executive Board’s discussion.

Source: Press Release No. 16/434, September 28, 2016, IMF Executive Board statement.