IMF refutes it asked Pakistan to seek loan at 11pc from commercial bank

ISLAMABAD: The International Monetary Fund (IMF) has stated that it did not ask Pakistan to get a commercial loan from a bank at an interest rate of 11 percent. Talking to media, an IMF spokesperson said that it is not in our knowledge that commercial buying at 11 percent has been undertaken and such financing is not necessary for programme financing assurances.

Despite progress, Pakistan’s vulnerabilities and structural challenges remain formidable, said the International Monetary Fund (IMF).

The Fund issued a statement which stated; the Executive Board of the International Monetary Fund (IMF) concluded the 2024 Article IV consultation and approved a 37-month Extended Arrangement under the Extended Fund Facility (EFF) for Pakistan in the amount of SDR 5,320 million (262 percent of quota, or around US$7 billion).

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The Board’s decision allows for an immediate disbursement of SDR 760 million (or about US$1 billion).

Pakistan has taken key steps to restoring economic stability with consistent policy implementation under the 2023-24 Stand-by Arrangement (SBA).

Growth has rebounded (2.4 percent in FY24), supported by activity in agriculture, while inflation has receded significantly, falling to single digits, amid appropriately tight fiscal and monetary policies.

A contained current account and calm foreign exchange market conditions have allowed the rebuilding of reserve buffers. Reflecting disinflation and steadier domestic and external conditions, the State Bank of Pakistan has been able to cut the policy rate by a total of 450 bps since June also supported by an appropriately tight FY25 budget.

Despite this progress, Pakistan’s vulnerabilities and structural challenges remain formidable. A difficult business environment, weak governance, and an outsized role of the state hinder investment, which remains very low compared to peers, while the tax base remains too narrow to ensure tax fairness, fiscal sustainability and meet Pakistan’s large social and development spending needs. In particular, spending on health and education has been insufficient to tackle persistent poverty, and inadequate infrastructure investment has limited economic potential and left Pakistan vulnerable to the impact of climate change.

Without a concerted adjustment and reform effort, Pakistan risks falling further behind its peers. Because of the progress and stability achieved under the 9-month 2023 SBA, the authorities are embarking on renewed efforts to address these challenges, build resilience and enable sustainable growth.

Key priorities under the new EFF-supported program include, (i) rebuilding policy making credibility and entrenching macroeconomic sustainability through consistent implementation of sound macro policies and a broadening of the tax base; (ii) advancing reforms to strengthen competition and raise productivity and competitiveness; (iii) reforming SOEs and improving public service provision and energy sector viability; and (iv) building climate resilience.

Earlier this month, Pakistan secured a $600 million commercial loan from a European bank at the highest interest in its history. It was reported at the time that this financing was pivotal to securing $7 billion in bailout from the IMF.

Copyright Business Recorder, 2024