IMF Executive Board Completes Eleventh Review Under the Extended Fund Facility for Pakistan

IMF News, June 27, 2016

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Canonical URL: IMF Executive Board Completes Eleventh Review Under the Extended Fund Facility for Pakistan

The Executive Board completed the eleventh review of Pakistan’s economic performance under a three-year program supported by an Extended Fund Facility (EFF) arrangement on June 27, 2016.
The completion enables the immediate disbursement of an amount equivalent to SDR 360 million (about US$501 million).
Total disbursements under the arrangement now equal SDR 4.32 billion (about US$6.01 billion).

On September 4, 2013, the Executive Board approved a 36-month extended arrangement under the EFF in the amount of SDR 4.393 billion (about US$6.64 billion at the time of approval), or 216 percent of Pakistan’s current quota at the IMF.

Economic recovery has gradually strengthened and short-term vulnerabilities have further receded on the back of improved macroeconomic stability and progress on structural reforms.
Preserving and consolidating macroeconomic stability and further advances with key structural reforms, including beyond the program’s horizon, are needed to foster stronger and more inclusive growth.

The authorities are on track to achieve their program’s end-year fiscal targets.
The authorities’ commitment to continue with gradual fiscal consolidation in FY2016/17 is welcomed.
Amendments to the Fiscal Responsibility and Debt Limitation Act will strengthen the anchor for medium-term fiscal policy, supporting fiscal sustainability and medium-term macroeconomic stability.
Sustaining progress with tax administration reforms to widen the tax base is needed to increase tax revenues and create fiscal space for priority infrastructure and to reinforce social expenditures.

Foreign exchange reserves have been progressively rebuilt under the program; continued accumulation of international reserves will further bolster external buffers and reduce vulnerabilities.
Maintaining a prudent monetary policy stance is needed to preserve achievements in containing inflation and to support macroeconomic stability.
Progress in strengthening the State Bank of Pakistan’s (SBP) autonomy is welcomed; addressing remaining recommendations of the 2013 IMF Safeguards Assessment will be important to strengthen the SBP further.

Advancing financial sector reforms is important to reinforce financial sector stability and development.
Important steps include establishing a deposit insurance scheme and strengthening the regulatory and supervisory framework.
Expansion of the coverage of tax crimes under the AML framework is welcome and will contribute to improved tax compliance and governance.

Continued progress with structural reforms is needed to raise Pakistan’s growth potential.
Restructuring and privatizing loss-making public sector enterprises (PSEs) remain a priority to ensure financial viability, reduce fiscal costs, and strengthen economic efficiency.
Authorities’ renewed commitment to attract private sector participation in privatization, while implementing measures to reduce PSEs’ financial losses, is welcomed in light of earlier delays.
Completing energy sector reform should remain a priority. The authorities’ decision to further contain accumulation of power sector arrears during the remainder of the program is welcome.
Focus on strengthening performance of power distribution companies and updating the power sector arrears reduction plan is encouraged.
Commitment to implement the new business climate reform strategy will be key to boost competitiveness, foster investment, and support private-sector-led growth.

IMF Press Release No. 16/308, June 27, 2016.