International Monetary Fund (IMF) Executive Directors on Wednesday commended Pakistan on "the successful completion" of its arrangement under the Poverty Reduction and Growth Facility (PRGF). The IMF Executive Directors, who met on Wednesday welcomed Pakistan authorities' decision "not to draw the final tranche," given Pakistan's improved economic situation, so that those resources become available for other countries in need of concessional support from the fund, an IMF announcement said.
It says, "The authorities have indicated that they do not wish to seek a successor arrangement following the expiration of the current arrangement. Instead, Pakistan will rely on domestic and international capital markets to meet its financing needs, complemented by continued support from the World Bank, the Asian Development Bank, and bilateral donors."
The IMF Executive Board completed on Thursday the ninth and final review under Pakistan's three- year PRGF arrangement.
While completion of this review enables the release of the equivalent of SDR 172.3 million (about US 262 million dollars), Pakistan authorities already stated that they will not draw the final tranche available under the arrangement, and will not seek a successor arrangement once the current PRGF arrangement expires in December.
Following the Executive Board's discussion of Pakistan's economic performance, Deputy Managing Director and Acting Chairman Augstin Carstens stated that "during Pakistan's three-year arrangement under the PRGF, the country had made a strong recovery from the economic crisis of the late 1990s.
He said: "Tighter macroeconomic policies and structural reforms have resulted in a stronger external position a lower public debt burden, renewed access to international capital markets, and a revival in growth, albeit accompanied lately by some increase in inflation."
"External support has played a part in Pakistan's recovery, but the turnaround has been primarily due to the implementation of strongly owned government policies," Carstens added.
The IMF announcement said, in completing the final review of the arrangement, the Executive Board also approved Pakistan's request for waivers for the non-observance of three structural performance criteria and of a continuous performance criterion against the imposition or intensification of exchange restrictions.
Total disbursements, under the PRGF arrangement approved on December 6, 2001, had amounted to the equivalent of SDR 661.4 million (about US 1.31 billion dollars).
Augustin Carstens added, "the fund will maintain a dialogue with the authorities on economic and financial developments and policies in the context of the fund's normal consultations with member countries."
He said, "maintaining high rates of economic growth will require the continued implementation of sound macroeconomic policies, with monetary policy focusing on maintaining low inflation and avoiding the entrenchment of inflationary expectations, as well as structural reforms."
"A continued fiscal effort will be needed to reduce the public debt burden further, while increasing funding for social spending, consistent with Pakistan's Poverty Reduction Strategy Paper," the IMF official said.
"The authorities will furthermore need to ensure that provincial and local governments have the administrative and financial means to carry out their increased responsibilities for the delivery of key public services, including health care and education," Carstens added.