First review of IMF extended fund facility: key to meet financial needs.

Byline: Shabbir Kazmi

The Executive Board of the International Monetary Fund (IMF) on 19th December 2019 completed the first review of Pakistan's economic performance under the Extended Fund Facility (EFF). The completion of the review allowed Pakistan to draw SDR 328 million or US$ 452.4 million, taking total disbursements to SDR 1,044 million or US$ 1,440 million. The Executive Board approved the 39-month, SDR 4,268 million or US$6 billion at the time of approval of the arrangement, EFF for Pakistan on July 3, 2019.

Following the Executive Board's decision, David Lipton, First Deputy Managing Director and Acting Chair, issued a statement stating, "Pakistan's program is on track and has started to bear fruit. However, risks remain elevated. Strong ownership and steadfast reform implementation are critical to entrench macroeconomic stability and support robust and balanced growth.

"The authorities are committed to sustaining the progress on fiscal adjustment to place debt on a downward path. The planned reforms include strengthening tax revenue mobilization, including the elimination of tax exemptions and loopholes, and prudent expenditure policies. Preparations for a comprehensive tax policy reform should start early to ensure timely implementation. Enhanced social safety nets will help alleviate social costs and build support for reforms.

"The flexible, market-determined exchange rate remains essential to cushion the economy against external shocks and rebuild reserve buffers. The current monetary stance is appropriately tight and should only be eased once disinflation is firmly entrenched. Strengthening the State Bank of Pakistan's autonomy and governance will support these efforts.

"Faster progress is needed to improve the AML/CFT framework, supported by technical assistance from the IMF and other capacity development providers. Swift adoption of all the necessary measures is needed to exit the FATF's list of jurisdictions with AML/CFT deficiencies.

"The authorities have adopted a comprehensive plan to address the accumulation of arrears in the power sector. Its full implementation is the key to improve collection, reduce losses, and enhance governance. Timely and regular adjustment of energy tariffs will bring the sector in line with cost recovery.

Efforts are ongoing to further improve the business environment, strengthen governance, and foster private sector investment. Reform of the state-owned enterprise sector will help put...