ISLAMABAD: In a diplomatic setback for India, the Executive Board of the International Monetary Fund (IMF) on Friday approved two major financial packages for Pakistan worth $2.3 billion, including a new $1.3 billion programme.
The IMF gave the green light to a $1 billion second loan tranche under the 37-month, $7 billion Extended Fund Facility (EFF) and also approved a fresh 28-month Resilience and Sustainability Facility (RSF) worth $1.3 billion.
Despite India’s attempt to block the approval during the Executive Board meeting, the global lender proceeded, citing Pakistan’s improved economic performance and fiscal reforms.
The $1 billion tranche under the EFF will be released immediately, bringing total disbursements under this programme to $2.1 billion. The remaining $1.3 billion under the RSF will be disbursed over 28 months.
The IMF and Pakistani authorities had earlier reached a staff-level agreement on both the review of the EFF and the new RSF in March. The agreement was subject to approval by the IMF Board, which was granted this week.
Pakistan’s economic team, led by Finance Minister Muhammad Aurangzeb and Finance Secretary Imdad Ullah Bosal, worked hard to keep the IMF programme on track. Deputy Prime Minister Ishaq Dar also played a key role by ensuring political support for difficult reforms, such as introducing agriculture income tax in Sindh and Balochistan.
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Under the new agreements, Pakistan will impose a carbon levy from July and increase water charges next year. Islamabad has also agreed to conduct a study on phasing out Special Economic Zones (SEZs) by 2035.
The IMF noted that Pakistan would continue fiscal discipline by avoiding unplanned spending and would focus on reducing public debt, supporting development and social sectors, and encouraging private investment.
