Pakistan will take “difficult decisions” to reboot its ailing economy, a top official said Thursday as he welcomed the IMF”s decision to provide a USD 6 billion bailout package over the next 39 months.
The International Monetary Fund on Wednesday formally approved the USD 6 billion loan to Pakistan, which is facing “significant” economic challenges on the back of “large” fiscal and financial needs and “weak and unbalanced” growth.
Commenting on the IMF”s decision, Adviser to the Prime Minister on Finance Abdul Hafeez Shaikh said that Pakistan by entering into an agreement with multilateral global lender was sending a message to the world that its government will exhibit responsibility in controlling its expenditures and will mobilise taxes from its wealthy classes.
Addressing a press conference here, Shaikh termed the IMF”s decision as “very important”.
“We will take difficult decisions,” he said, adding that measures will be taken to protect the vulnerable segments of society. He said the government had in its recently unveiled budget raised allocations for the poor classes and women and provided incentives for the business community.
He said the government of Prime Minister Imran Khan had inherited a debt of nearly USD 31,000 billion and the economic managers had taken several decisions to return these loans, one of which was approaching the IMF.
On Wednesday, the Executive Board of the IMF approved a 39-month extended arrangement under the Extended Fund Facility (EFF) for Pakistan for an amount of SDR 4,268 million (about USD 6 billion or 210 per cent of quota) to support the authorities” economic reform programme.
The EFF-supported programme will help Pakistan to reduce economic vulnerabilities and generate sustainable and balanced growth, the IMF said in a statement.
The Executive Board”s approval allows for an immediate disbursement of SDR716 million (or about USD 1 billion). The remaining amount will be phased over the duration of the program, subject to four quarterly reviews and four semi-annual reviews.
Following the IMF Executive Board discussion, David Lipton, First Deputy Managing Director and Acting Chair, said that Pakistan was “facing significant economic challenges on the back of large fiscal and financial needs and weak and unbalanced growth.” In this context, the authorities” programme aims to tackle long-standing policy and structural weaknesses, restore macroeconomic stability, catalyze significant international financial support, and promote strong and sustainable growth,” Lipton said.
He said Pakistan”s provinces will have to show a strong commitment to support the consolidation effort, and effective public financial management to improve the quality and efficiency of public spending.
“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 programmes, supporting measures for the economic empowerment of women, and investment in areas where poverty is high,” Lipton said.