IMF Executive Board Approves US$6 billion 39-Month EFF Arrangement for Pakistan
IMF News, July 3, 2019
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Bibliographic details
- Published: July 3, 2019
Approval and financial terms
- On July 3, 2019, the Executive Board approved a 39-month extended arrangement under the Extended Fund Facility (EFF) for Pakistan for an amount of SDR 4,268 million (about US$6 billion or 210 percent of quota).
- The Fund’s immediate disbursement: SDR716 million (or about US$1 billion).
- Remaining amount to be phased over the duration of the program, subject to four quarterly reviews and four semi-annual reviews.
- The approval is expected to unlock from Pakistan’s international partners around USD38 billion over the program period.
Program objectives and core policy measures
- Objective: support the authorities’ economic reform program to generate sustainable and balanced growth and reduce economic vulnerabilities.
- Key elements:
- Decisive fiscal consolidation to reduce public debt and build resilience, starting with adoption of an ambitious FY 2020 budget.
- Revenue mobilization: increase revenue mobilization by 4 to 5 percent of GDP at the federal and the provincial level over the program period.
- Expand social spending and strengthen/broaden safety nets to protect the most vulnerable.
- Flexible, market-determined exchange rate to restore competitiveness, rebuild official reserves, and provide a buffer against external shocks.
- Appropriate monetary policy conducted by an independent central bank to shore up confidence and contain inflation; measures to strengthen State Bank of Pakistan autonomy and eliminate central bank financing of the budget deficit.
- Energy sector reforms to eliminate quasi-fiscal losses, depoliticize gas and power tariff setting, and over the program period gradually bring the sector to cost recovery.
- Structural reforms to strengthen institutions, increase governance and transparency, improve business climate, fight corruption, and enhance the AML/CFT framework.
- Rationale: these measures aim to catalyze significant international financial support, restore macroeconomic stability, and promote strong and sustainable growth.
Policy guidance and priorities (as stated by IMF’s David Lipton)
- Fiscal: multi-year revenue mobilization strategy, broaden tax base, raise tax revenue in a well-balanced and equitable manner; strong commitment by provinces to support consolidation; effective public financial management to improve quality and efficiency of public spending.
- Social protection: significant increase in resources allocated to key social assistance programs; supporting measures for the economic empowerment of women; investment in areas where poverty is high.
- Monetary and exchange rate framework: flexible market-determined exchange rate and an adequately tight monetary policy; strengthen SBP autonomy and end central bank financing of the budget deficit.
- Structural and institutional reforms: address energy sector weaknesses, improve governance of state-owned enterprises, improve business climate, strengthen anti-corruption and AML/CFT efforts to enable private investment and job creation.
Recent economic developments and outlook (overview)
- Pakistan’s economy faced legacy misaligned policies: large fiscal deficits, loose monetary policy, defense of an overvalued exchange rate; consequences included eroded macroeconomic buffers, increased external and public debt, depleted international reserves.
- Structural weaknesses: weak tax administration, difficult business environment, inefficient and loss making SOEs, large informal economy.
- Without urgent policy action, economic and financial stability could be at risk and growth prospects insufficient for a rapidly growing population.
- The Fund-supported program is expected to coalesce broader support from multilateral and bilateral creditors in excess of US$38 billion.
Selected economic indicators (2014/15–2019/20)
- Population: 207.8 million (2016/17; provisional)
- Per capita GDP: US$1,463 (2016/17)
- Poverty rate: 29.5 percent (2012/13)
- Main exports: Textiles ($12.8 billion, 2015/16)
- Unemployment: 5.9 percent (2014/15)
Output and prices (Real GDP at factor cost; GDP deflator; Consumer prices)
- Real GDP at factor cost:
- 2014/15: 4.1
- 2015/16: 4.6
- 2016/17: 5.2
- 2017/18: 5.5
- 2018/19 Est.: 3.3
- 2019/20 Proj.: 2.4
- GDP deflator at factor cost:
- 2014/15: 4.3
- 2015/16: 0.4
- 2016/17: 4.0
- 2017/18: 7.5
- 2018/19: 11.8
- Consumer prices (period average):
- 2014/15: 4.5
- 2015/16: 2.9
- 2016/17: 3.9
- 2017/18: 7.3
- 2018/19: 13.0
- Consumer prices (end of period):
- 2014/15: 3.2
- 2015/16: 8.4
Exchange rate (Pakistani rupees per U.S. dollar)
- Period average:
- 2016/17: -1.5
- 2017/18: 5.0
- End of period:
- 2016/17: …
- 2017/18: 2.8
- 2018/19: 0.2
- 2019/20: 13.9
Saving and investment (In percent of GDP)
- Gross saving:
- 2014/15: 14.7
- 2015/16: 12.0
- 2016/17: 10.4
- 2017/18: 10.8
- 2018/19: 12.1
- Government:
- 2014/15: -1.6
- 2015/16: -0.7
- 2016/17: -0.8
- 2017/18: -2.2
- 2018/19: -3.6
- 2019/20: -3.8
- Nongovernment (including public sector enterprises):
- 2014/15: 16.3
- 2015/16: 14.6
- 2016/17: 12.8
- 2017/18: 12.6
- 2018/19: 14.5
- 2019/20: 15.9
- Gross capital formation:
- 2014/15: 15.7
- 2015/16: 16.2
- 2016/17: 16.7
- 2017/18: 15.4
- 2018/19: 3.7
- 2019/20: 4.9
Public finances (In percent of GDP)
- Revenue and grants:
- 2014/15: 15.5
- 2015/16: 15.2
- 2016/17: 15.0
- Expenditure (including statistical discrepancy):
- 2014/15: 19.1
- 2015/16: 19.2
- 2016/17: 21.1
- 2017/18: 21.7
- 2018/19: 23.4
- Budget balance (including grants):
- 2014/15: -5.3
- 2015/16: -4.4
- 2016/17: -5.8
- 2017/18: -6.4
- 2018/19: -6.8
- 2019/20: -7.1
- Budget balance (excluding grants):
- 2014/15: -5.4
- 2015/16: -4.6
- 2016/17: -6.5
- 2017/18: -7.0
- 2018/19: -7.3
- Primary balance (excluding grants):
- 2014/15: -0.3
- 2015/16: -1.8
- 2016/17: -0.6
- General government debt incl. IMF obligations:
- 2014/15: 63.3
- 2015/16: 67.6
- 2016/17: 67.0
- 2017/18: 71.7
- 2018/19: 74.9
- 2019/20: 76.9
- External general government debt:
- 2014/15: 18.9
- 2015/16: 20.8
- 2016/17: 20.5
- 2017/18: 24.3
- 2018/19: 26.5
- 2019/20: 32.0
- Domestic general government debt:
- 2014/15: 44.4
- 2015/16: 46.8
- 2016/17: 46.5
- 2017/18: 47.4
- 2018/19: 48.4
- 2019/20: 44.9
Monetary sector (Annual changes in percent of initial stock of broad money, unless otherwise indicated)
- Net foreign assets:
- 2014/15: 2.2
- 2015/16: 1.7
- 2016/17: -3.2
- 2017/18: -5.6
- 2018/19: -6.3
- 2019/20: 8.9
- Net domestic assets:
- 2014/15: 11.0
- 2015/16: 16.9
- 2016/17: 15.3
- 2017/18: 17.1
- Broad money (percent change):
- 2014/15: 13.2
- 2015/16: 13.7
- 2016/17: 9.7
- Reserve money (percent change):
- 2014/15: 9.9
- 2015/16: 22.5
- 2016/17: 12.7
- 2017/18: 13.5
- Private credit (percent change):
- 2014/15: 5.9
- 2015/16: 11.1
- 2016/17: 16.6
- 2017/18: 14.9
- 2018/19: 13.3
- Six-month treasury bill rate (period average, in percent):
- 2014/15: 8.8
- 2015/16: 6.3
- 2016/17: 6.0
External sector
- Merchandise exports, U.S. dollars (percentage change):
- 2014/15: -3.9
- 2015/16: -8.8
- 2016/17: 0.1
- 2017/18: 8.2
- Merchandise imports, U.S. dollars (percentage change):
- 2014/15: -1.0
- 2015/16: 0.0
- 2016/17: 17.9
- 2017/18: -4.2
- 2018/19: -4.7
- Current account balance (in percent of GDP):
- 2014/15: -1.7
- 2015/16: -4.1
- 2016/17: -2.6
- Financial account (billions of U.S. dollars):
- 2014/15: 6.8
- 2015/16: 10.2
- 2016/17: 14.3
- 2017/18: 10.7
- 2018/19: 8.7
External public and publicly guaranteed debt (In percent of exports of goods and services, unless otherwise indicated)
- External public and publicly guaranteed debt:
- 2014/15: 159.8
- 2015/16: 193.3
- 2016/17: 209.4
- 2017/18: 218.3
- 2018/19: 225.2
- 2019/20: 234.0
- Debt service:
- 2014/15: 20.7
- 2015/16: 22.2
- 2016/17: 30.1
- 2017/18: 26.3
- 2018/19: 37.9
- 2019/20: 45.7
- Gross reserves (in millions of U.S. dollars) 3/:
- 2014/15: 13,534
- 2015/16: 18,143
- 2016/17: 16,141
- 2017/18: 9,789
- 2018/19: 6,824
- 2019/20: 11,187
- Gross reserves (In months of next year's imports of goods and services):
- 2014/15: 1.9
- 2015/16: 1.4
Memorandum items
- Underlying fiscal balance (excl. grants; percent of GDP) 4/
- General government and government guaranteed debt (incl. IMF; % GDP):
- 2014/15: 65.7
- 2015/16: 70.1
- 2016/17: 70.0
- 2017/18: 75.3
- 2018/19: 79.1
- 2019/20: 80.5
- Net general government debt (incl. IMF; % GDP):
- 2014/15: 58.2
- 2015/16: 61.3
- 2016/17: 61.5
- 2017/18: 66.8
- 2018/19: 70.7
- 2019/20: 73.5
- Real effective exchange rate (end of period percentage change):
- 2014/15: 6.5
- 2015/16: 2.1
- 2016/17: 3.4
- 2017/18: -11.2
- Terms of trade (percentage change):
- 2014/15: -1.3
- 2015/16: -0.1
- Real per capita GDP (percentage change):
- 2014/15: 2.0
- 2015/16: 2.6
- 2016/17: 3.6
- 2017/18: 0.5
- GDP at market prices (in billions of Pakistani rupees):
- 2014/15: 27,443
- 2015/16: 29,076
- 2016/17: 31,922
- 2017/18: 34,619
- 2018/19: 38,559
- 2019/20: 44,446
Source: IMF press release "IMF Executive Board Approves US$6 billion 39-Month EFF Arrangement for Pakistan" (Press Release No. 19/264).
Content in this bundle
- Press release