Washington: The International Monetary Fund (IMF) approved the provision of 1.386 billion US dollars to Pakistan to meet the emergency balance of payments demand that broke out due to the COVID-19 pandemic.
The International Monetary Fund approved on Thursday a meeting of the members of the Executive Board of Directors in Washington, D.C., to pay $ 1.386 billion under fast financing instruments to address the economic impact of the Covid-19 shock in Pakistan.
Although the uncertainty is still high, it is expected that the near-term economic impact of COVID-19 will be huge, resulting in a large amount of financial and external financing needs. The IMF ’s support will help support the reduction of international reserves and provide funding for targeted and temporary expenditure increases in the budget to curb the epidemic and mitigate its economic impact.
The IMF is still in close contact with the Pakistani authorities, and the impact of the COVID-19 shock subsidy will resume discussions as part of the current federal emergency financing.
After discussion by the Executive Board, the first deputy managing director and acting chairman Mr. Okamoto Jeffrey Okamoto made the following statement:
“The outbreak of Covid-19 is having a major impact on the Pakistani economy. Domestic containment measures, coupled with the global economic downturn, are seriously affecting economic growth and straining external financing. This has created an urgent balance of payments demand.
“In this context of heightened uncertainty, IMF emergency financing under the Rapid Financing Instrument provides strong support to the authorities’ emergency policy response, preserving fiscal space for essential health spending, shoring up confidence, and catalyzing additional donor support.
“In response to the crisis, the government of Pakistan has taken swift action to halt the community spread of the virus and introduced an economic stimulus package aimed at accommodating the spending needed to tackle the health emergency and supporting economic activity. Crucially, the authorities are increasing public health spending and strengthening social safety net programs to provide immediate relief to the most vulnerable. Similarly, the State Bank of Pakistan has adopted a timely set of measures, including a lowering of the policy rate and new refinancing facilities, to support liquidity and credit conditions and safeguard financial stability. In this context, the authorities’ policies should be targeted and temporary.
“As the crisis abates, the authorities’ renewed commitment to the reforms in the existing Extended Fund Facility—in particular those related to fiscal consolidation strategy, energy sector, governance, and remaining AML/CFT deficiencies—will be crucial to entrench resilience, boost Pakistan’s growth potential, and deliver broad based benefits for all Pakistanis.
“Expeditious donor support is needed to close the remaining balance of payments gap and ease the adjustment burden.”