Stage is set to lift country out of economic crisis, PM says after IMF deal

Prime Minister-elect Shehbaz Sharif speaks after winning a parliamentary vote to elect a new prime minister, at the National Assembly, in Islamabad, Pakistan April 11, 2022. Press Information Department (PID)/Handout via Reuters.
  • The IMF and Pakistan reach a service-level agreement to revive the program.
  • “It was great teamwork,” Prime Minister Shehbaz Sharif said.
  • Prime Minister Shehbaz appreciates Miftah and Bilawal for their efforts.

ISLAMABAD: Prime Minister Shehbaz Sharif said on Thursday that the revival of the International Monetary Fund (IMF) program paved the way for the government to pull the country out of the current financial crisis.

The Fund said it has reached a staff-level agreement with Pakistan that will pave the way for the disbursement of $1.17 billion, if approved by the IMF’s board, and that it plans to add funds to the program.

In a statement, the IMF said its staff had reached agreement on policies as part of a review of its Expanded Financing Facility (EFF) program that could bring total disbursements under the program to around $4.2 billion if approved.

The Prime Minister, in a statement on Twitter, commended the Ministry of Finance and Ministry of Foreign Affairs teams – led by Finance Minister Miftah Ismail and Foreign Minister Bilawal Bhutto Zardari – for their efforts to revive the IMF program.

“It was great teamwork. The agreement with the Fund has prepared the ground to lift the country out of economic difficulties,” said Prime Minister Shehbaz.

PML-N leader and former finance minister Ishaq Dar hopes the development will bring calm to the foreign exchange market and contribute to the “long journey towards the goal of macroeconomic stability”.

An initial $6 billion bailout was signed by former Prime Minister Imran Khan in 2019 but repeatedly stalled when his government reneged on grant deals and failed to improve ways significant tax collection.

The new deal follows months of deeply unpopular restrictions by the government of Shehbaz Sharif, which took power in April and effectively eliminated fuel subsidies and introduced new measures to broaden the tax base.

The new government has cut a series of subsidies to meet demands from global financial institutions, but risks the wrath of an electorate already struggling with the brunt of double-digit inflation.

A new coalition government – ​​which came to power after Khan was ousted in a parliamentary no-confidence vote – said it would make the tough decisions needed to get the economy back on track.

In a bid to secure the IMF loan, Prime Minister Shehbaz imposed three fuel price hikes – totaling 50% in total – and increased the cost of electricity to end the subsidies introduced by Khan.

Additionally, in order to meet higher financing needs, the IMF Executive Board will also consider an extension of the EFF until the end of June 2023, and an addition of nearly $1 billion that would bring access total under the program at about $7 billion, he said. .

“Pakistan finds itself in difficult economic times,” Nathan Porter, who led the IMF team, said in a statement, citing the difficult external environment and domestic policies that have fueled demand to unsustainable levels.

— Additional input from Reuters


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