Circumstances make it difficult to recalibrate EFF: IMF

The severity of the COVID-19 shock and the uncertainty about the outlook, make it difficult to recalibrate the existing Extended Fund Facility (EFF) to ensure that it remains on track to meet its objectives, says the International Monetary Fund (IMF).

The IMF in its latest report, "Request for purchase under the Rapid Financing Instrument (RFI)," stated that Pakistani authorities requested financial assistance under the RFI in the amount of 50 percent of quota (SDR 1,015.5 million) to help address the urgent fiscal and balance of payment (BoP) needs, while making these resources available to the budget to support the emergency policy response.

The RFI is the appropriate instrument to support Pakistan at this juncture. The Fund's support under the RFI is expected to catalyse additional donor financing.

According to the Letter of Intent (LoI) submitted to the IMF for RFI, the government has committed to the IMF that it would submit agreed amendment to the State Bank of Pakistan (SBP) Act, to the National Assembly.

"In line with the safeguards policy, an updated safeguards assessment was completed in December 2019 and we are committed to addressing the remaining issues, including through the agreed submission of amendments to the SBP Act to the National Assembly.

Since the funds obtained under this RFI will be used for budget financing, we will update the existing memorandum of understanding between the Ministry of Finance and the State Bank of Pakistan on their respective responsibilities for servicing the related financial obligations to the IMF," maintained in the LoI.

"We remain committed to the reforms included in the EFF and aim to press ahead with their decisive implementation as soon as the immediate pressures subside.

These reforms are crucial to boost Pakistan's growth potential, build buffers, and reduce vulnerabilities. In particular, once the current crisis has abated, we will resume the fiscal consolidation effort envisaged in the EFF to place debt on a firm downward path and create fiscal space for much-needed social and infrastructure spending and we will continue to strengthen governance by enhancing the effectiveness of anti-corruption and AML/CFT frameworks," stated in the LoI.