Press Release No. 14/583

Press Release: IMF Executive Board Completes Fourth and Fifth Reviews Under Extended Fund Facility Arrangement for Pakistan, and Approves US$1.05 Billion Disbursement

December 17, 2014

The Executive Board of the International Monetary Fund (IMF) today completed the fourth and fifth reviews of Pakistan’s economic performance under a three-year program supported by an Extended Fund Facility (EFF). The conclusion of the review enables the release of an amount equivalent to SDR 720 million (about US$1.05 billion), bringing total disbursements under the arrangement to SDR 2.2 billion (about US$3.2 billion).

In completing the fourth and fifth reviews, the Executive Board also approved the authorities’ request for waivers of non-observance of performance criteria on the basis of the corrective measures taken, including prior actions on net domestic assets and on government borrowing from the State Bank of Pakistan.

The Executive Board approved on September 4, 2013 the EFF for Pakistan in the amount of SDR 4.393 billion (about US$6.44 billion, or 425 percent of Pakistan’s quota at the IMF) (see Press Release No. 13/322).

Following the Executive Board’s discussion on Pakistan, Mr. David Lipton, First Deputy Managing Director and Acting Chair issued the following statement:

“Macroeconomic conditions are improving, but significant risks to the recovery remain. The measures taken by the authorities to address short-term macroeconomic vulnerabilities and implement structural reforms are bearing fruit, but continued efforts are needed to make the economic transformation more sustainable.

“Fiscal consolidation is broadly on track, but the authorities must be prepared to take further action to address possible revenue shortfalls. There is still ample scope for increasing tax revenues, especially through tax administration reforms. The government has reduced its reliance on central bank financing, but a robust organizational framework for public debt management needs to be implemented.

“Efforts to boost international reserves should continue, including through spot purchases and allowing greater exchange rate flexibility. Monetary policy remains prudent, focused on meeting program monetary targets and achieving a sustained reduction in inflation. Legislation to enhance central bank independence is crucial and should conform to international best practices. It should be complemented by enhanced communication of the central bank price stability objective, improved functioning of the interest rate corridor, and effective open market operations.

“The financial sector remains stable and profitable. Ongoing financial sector reforms and remedial actions in the few banks that don’t reach minimum capital requirements will ensure the system’s continued health.

“Structural reforms are progressing. Addressing the administrative constraints on the power sector’s regulatory framework, improving the operations and collections of energy companies, and electricity tariff reform should continue. The implementation of gas price rationalization should move forward with the gas levy and more favorable producer prices to better allocate the current supply and encourage new production. Commitment to privatization of public sector enterprises is strong, but potential difficulties are related to market conditions. Trade policy and business climate reforms are progressing.

“Finally, the Executive Board, management and staff of the Fund express their deepest condolences to the people of Pakistan for the loss of innocent life in the recent horrific attack on a school in Peshawar.”