Key priorities highlighted by IMF for Pakistan’s $7bn Extended Fund Facility

In a key development, the International Monetary Fund (IMF) Executive Board approved Pakistan’s 37-month Extended Fund Facility (EFF) arrangement of about $7 billion on Wednesday.

Following the approval, the State Bank of Pakistan (SBP) on Friday received the first tranche of Special Drawing Rights (SDR) 760 million, equivalent to $1.03 billion, from the IMF.

Despite progress, Pakistan’s vulnerabilities, structural challenges remain formidable: IMF

The inflows are expected to improve the country’s forex reserves’ position, which will be reflected in SBP data next week.

The IMF said the new programme will require sound policies and reforms to support the authorities’ ongoing efforts to strengthen macroeconomic stability, address deep structural challenges, and create conditions for stronger, more inclusive, and resilient growth.

Here are some key priorities under the EFF outlined in the IMF statement:

• Rebuilding policy-making credibility and entrenching macroeconomic sustainability: This requires consistent implementation of sound fiscal, monetary, and exchange rate policies, better public spending, and raising fairer and more efficient taxes, especially from undertaxed sectors, while creating space for higher spending on health and education and strengthening social protection.

• Raising productivity and competitiveness: Reforms should focus on creating a more favorable private sector business environment, by removing state-created distortions and ensuring a fair and level playing field with increased competition. This includes streamlined subsidies, an improved FDI regime, deepened bank intermediation, and scaled-up human capital investment.

• Reforming SOEs and improving public service provision:
  This can be achieved through SOE restructuring and privatization, governance and transparency reforms, measures to reduce the cost structure of the energy sector and phasing out the government’s role in price setting.

• Building climate resilience: The implementation of the C-PIMA Action Plan and supporting the authorities’ National Adaptation Plan.