Editorial
In a recent Senate session, Federal Finance Minister Muhammad Aurangzeb discussed the potential conclusion of Pakistan’s 7 billion dollar Extended Fund Facility (EFF) programme with the International Monetary Fund (IMF). He noted that if structural reforms are successfully executed, the EFF could mark the country’s final IMF programme.
Despite reaching a staff-level agreement (SLA) on 12 July, the approval of the EFF by the Fund Board is pending, creating uncertainty about the disbursement timeline. Notably, the Fund’s Board calendar does not include Pakistan up to 18 September, prompting concerns that the government has yet to fulfil the agreed “prior” conditions.
One important requirement involves securing foreign loans from multilateral and bilateral sources as budgeted, with commitments from the signatories to the Letter of Intent. While the Minister of Finance and the Governor of the State Bank of Pakistan have expressed optimism about meeting these targets, there are doubts surrounding the actual progress, especially in light of the differing statements about the source of loans.
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Furthermore, the Punjab government’s decision to subsidize electricity without budgetary provisions has raised concerns about the government’s adherence to the terms and conditions of the SLA. This move has sparked worries that the political leadership may not fully comply with the agreements made with the IMF.
The successful implementation of the agreed reforms is crucial for the approval of the EFF loan by the Fund Board and the release of pledged assistance from bilateral partners. Without an active IMF programme, obtaining further loans from multilateral or bilateral sources remains challenging, potentially jeopardizing the country’s financial stability.
However, the stringent upfront conditions agreed upon with the IMF under the EFF might not be the final programme loan, as they could lead to additional challenges. The focus on revenue collections without addressing the taxation structure and the proposed austerity measures raise concerns about the potential impact on the country’s economy and the general public.
