IMF approves $1.1b tranche for Pakistan.

ISLAMABAD -- The Executive Board of the International Monetary Fund (IMF) on Monday revived Pakistan's bailout programme after a hiatus of six months, approving the $1.1 billion tranche and ending uncertainty that multiplied in past three days due to manoeuvring by the Pakistan Tehreek-e-Insaf (PTI).

The IMF said that Pakistan's economy will grow to around 3.5% but the average inflation rate is estimated at 19.9% -- the projections that had been made before the floods destroyed vast swathes of the country.

The global lender also approved an increase in the loan size to $6.5 billion and extended its expiry date till June 2023. The $6 billion original programme was going to end next month with half of the amount undisbursed due to failure of the PTI government to fulfil its commitments.

With the augmentation, the programme size has been increased to the SDR4.988 billion, which is equivalent to 245.6 per cent of Pakistan's quota.

'The board's decision allows for an immediate disbursement of SDR894 million (about $1.1 billion), bringing total purchases for budget support under the arrangement to $3.9 billion,' according to a statement issued by the IMF after the meeting.

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In its handout, the IMF emphasised the need to increase electricity prices and enhance taxes on petroleum products, as per the schedule agreed between Pakistan and the IMF.

'Efforts to strengthen the viability of the energy sector and reduce unsustainable losses, including by adhering to the scheduled increases in fuel levies and energy tariffs, are also essential,' said IMF Deputy Managing Director Antoinette Sayeh.

She said that containing current spending and mobilising tax revenues are critical to create space for much-needed social protection and strengthen public debt sustainability.

The IMF also stressed that Pakistan should keep following the policy of high interest rates and market-determined exchange rate.

'The tightening of monetary conditions through higher policy rates was a necessary step to contain inflation. Going forward, continued tight monetary policy would help to reduce inflation and address external imbalances,' the deputy managing director said.

She added that maintaining proactive and data-driven monetary policy would support these objectives. Preserving a market-determined exchange rate remained crucial to absorb external shocks, maintain competitiveness, and rebuild international reserve, Antoinette...