ISLAMABAD: Pakistan and the International Monetary Fund (IMF) are discussing a standby arrangement (SBA) worth about $2.5bn as the Extended Fund Facility (EFF) will expire on June 30. It is one of the two options under discussion between the two sides. Pakistan has completed the conditions & prior actions for the ninth review. Not only that but the requirements for 10th & 11th reviews are also met.
The SBA came into the discussion after Prime Minister Shehbaz Sharif and Managing Director of IMF Kristalina Georgieva connected. An official told that Pakistan is eligible to receive the remaining outstanding approved quota as it has completed the conditions till the 11th review. He added that for the completion of the 9th review, Pakistan & IMF have exchanged Memorandum of Economic & Financial Policies (MEFP). But the rules of the funds do not allow quick reviews especially when the expiry date of the programme is near.
Now the two options under discussion are:
- Disbursement of $1.1 billion as per the ninth review, which would mean that programme has ended without any possibility of securing two tranches of $1.4 billion
- Arrange a standby arrangement that provides disbursement equivalent to the 9th review ($1.1 billion) by mid-July & then three more reviews of $500 million.
The option of a short-term arrangement will give a sense of stability to the market as the current government has less than two months to complete its term. To finalise an option, Pakistan & IMF have to arrange a staff-level agreement by June 30 followed by the approval of the executive board next week.
IMF had objections over the budget presented on June 9. But it has confirmed that applied changes in the budget, including ending the amnesty scheme for remittances, expenditure cuts, and additional taxes fulfilled the conditions laid by the global money lender.
IMF has acknowledged the fact that Pakistan has completed that policy action swiftly. Recently, Pakistan suddenly increased the policy rate of the central bank to 22 per cent (highest in history) to complete IMF condition.