ISLAMABAD – The International Monetary Fund (IMF) supported program is expected to integrate broader support from multilateral and bilateral creditors in excess of US $ 38 billion over the programme period (39 months), which is crucial for Pakistan to meet its large financing needs in the coming years.
The IMF Executive Board in its meeting held on July 3, approved the US $ six billion 39-Month Extended Fund Facility arrangement for Pakistan to support the country’s economic reform programme, a statement by IMF said on Thursday.
The meeting was chaired by First Deputy Managing Director IMF David Lipton. During the meeting, the chair said Pakistan was facing significant economic challenges on the back of large fiscal and financial needs and weak and unbalanced growth.
In this context, he said the authorities’ program aimed to tackle long-standing policy and structural weaknesses, restore macroeconomic stability, catalyze significant international financial support and promote strong and sustainable growth.
“A decisive fiscal consolidation is a key to reducing the large public debt and building resilience, and the adoption of the FY 2020 budget is an important initial step. Achieving the fiscal objectives will require a multi-year revenue mobilization strategy to broaden the tax base and raise tax revenue in a well-balanced and equitable manner. It will also require a strong commitment by the provinces to support the consolidation effort, and effective public financial management to improve the quality and efficiency of public spending,” he said.
“Protecting the most vulnerable from the impact of adjustment policies will be an important priority. This will be achieved by a significant increase in resources allocated to key social assistance programs, supporting measures for the economic empowerment of women, and investment in areas where poverty is high.”
David Lipton said, “A flexible market-determined exchange rate and an adequately tight monetary policy will be key to correcting imbalances, rebuilding reserves, and keeping inflation low. In this regard, measures to strengthen the State Bank of Pakistan’s (SBP) autonomy and eliminate central bank financing of the budget deficit will enable the SBP to deliver on its mandate of price and financial stability”.
He said an ambitious agenda to strengthen institutions and remove impediments to growth would allow Pakistan to reach its full economic potential.
Addressing structural weaknesses in the energy sector and improving the governance of state-owned enterprises will ensure efficiency and better services, thus boosting economic activity.
Moreover, improving the business climate, strengthening efforts to fight corruption, and enhancing the Anti Money Laundering (AML)/ Counter Financing of Terrorism (CFT) framework will create an enabling environment for private investment and job creation.
“The strong financial support to the authorities’ policy efforts by Pakistan’s international partners is essential to meet the large external financing needs in the coming years and allow the program to achieve its objectives”, he added.
