In its efforts to put the cash-strapped economy back on track, the Pakistan government has decided to formally approach the IMF for a medium-term Extended Fund Facility during the upcoming Annual Spring Meetings of Bretton Woods Institutions next week, a media report said on Wednesday.
Islamabad will make a request for the medium-term Extended Fund Facility (EFF) with the possibility of augmenting through climate finance as Pakistan’s delegation led by Finance Minister Muhammad Aurangzeb will attend the meetings to be held from April 15 to 20 in Washington DC, The News International reported.
The Bretton Woods Institutions are the World Bank and the International Monetary Fund (IMF) called so as both were set up at a meeting of 43 countries in Bretton Woods, New Hampshire, USA in July 1944.
In mid-March, IMF’s global team reached a staff-level agreement with the Pakistani authorities on the second and final review of Pakistan’s stabilisation programme supported by the global lender’s USD 3 billion standby arrangement approved in July last year.
On March 26, Prime Minister Shehbaz Sharif too had indicated that his government is planning to approach the IMF for “another programme”, days after the economic crisis-ridden country struck a staff-level agreement with the global lender regarding the disbursal of the final tranche of USD 1.1 billion.
“With the augmentation of the next bailout package through climate finance, Pakistan is all set to make a formal request to IMF during the upcoming annual spring meetings,” the report said, quoting top official sources.
The size and duration of the upcoming bailout package will be worked out by the IMF’s review mission expected to hold talks, probably from the first week of May 2024, to finalise major contours of the upcoming bailout package, it said.
The sources said Pakistan decided to request augmenting the EFF through climate finance, so there was a possibility for securing USD 6 billion to USD 8 billion size of the upcoming programme.
“We are going to present our argument before the IMF management that Pakistan faced severe consequences of climate degradation and deserved support from the international community and donor agencies,” the report quoted sources as saying.
The sources said there was one IMF instrument under the Resilience and Sustainability Facility (RSF) which provided affordable long-term financing to countries undertaking reforms to reduce risks to prospective balance of payments stability, including those related to climate change and pandemic preparedness.
“By reducing prospective balance of payment risks, an RSF arrangement aims to contribute to longer-term Balance of Payment (BoP) stability. In some cases, the RSF arrangements may also have an impact on short- and medium-term BoP needs,” the newspaper said.
The IMF staff should illustrate in programme documentation risks to prospective BoP stability that may entail longer-term BoP financing needs associated with the relevant longer-term structural challenge, it added.
The News International further said it contacted the IMF spokesperson based in Washington DC last week and inquired whether Pakistan’s total public debt was sustainable. She (the spokesperson) referred to the last review of the IMF done under the Standby Arrangement (SBA) whereby the IMF termed the country’s debt within the ambit of sustainability.
Pakistan’s total public debt is projected to rise to Rs 120 trillion over the medium term as projected by the IMF over the next three to five-year period.
Pakistan has also approved the Public Investment Management Assessment (PIMA) framework, including Climate-PIMA under the guidelines of the IMF’s technical report.
Earlier this month, the World Bank’s biannual Pakistan Development Outlook report painted a grim economic picture, indicating that the country is set to miss almost all major macroeconomic targets cautioning that over 10 million more people are at risk of descending into poverty.
The Washington-based lender’s apprehension came from a sluggish economic growth rate of 1.8 per cent, coupled with soaring inflation, a staggering 26 per cent in the current fiscal year.
