By Muhammad Soban

ISLAMABAD, July 15, (WealthPK): The revival of the Extended Fund Facility progarmme by the International Monetary Fund (IMF) will provide a breathing space to the strained economy of Pakistan, WealthPK reports.

Pakistan and IMF reached a staff-level agreement after the combined seventh and eighth reviews of a $6 billion loan facility, paving the way for the release of the much-awaited $1.17 billion loan to the country by the international financial institution.

The economy of Pakistan is facing daunting challenges owing to the international situation as well as domestic issues. The outbreak of the Covid-19 pandemic has badly affected the economy of Pakistan like other countries during the last three years. Consequently, fiscal deficits increased in the financial year 2022, pushing inflation higher in the country and eroding reserve buffers.

After a long delay and discussions, the IMF finally revived Pakistan Extended Fund Facility (EFF) programme. A press release issued by the IMF said that its team reached a staff-level agreement with the Pakistan authorities for the conclusion of the combined seventh and eighth reviews of the EFF-supported programme.

The agreement is subject to approval by the IMF's executive board. Approximately $1,177 million will become available to Pakistan, bringing the total disbursements under the programme to about $4.2 billion.

Additionally, in order to support implementation of the programme and meet the higher financing needs in the financial year 2023, as well as catalyse additional financing, the IMF board will consider an extension of the EFF until June 2023 and an augmentation of access by $720 million that will bring the total access under the EFF to about $7 billion.

The immediate priority of Pakistan is to stabilise the economy through the steadfast implementation of the recently approved budget for the financial year 2023 besides continued adherence to a market-determined exchange rate and a proactive and prudent monetary policy. The government needs to expand social safety to protect the most vulnerable and accelerate structural reforms, including improving the performance of state-owned enterprises and governance.

However, experts told WealthPK that taking loans from the IMF and other countries in a difficult economic situation is a short-term solution. Pakistan needs to make serious efforts to solve the structural problem of its economy.

Pakistan’s current account deficit is widening as it soared to $15.2 billion during the first 11 months of the financial year 2021-22. Pakistan has to lessen the trade deficit by focusing on increasing exports and reducing the import bill.

The government needs to take concrete steps to resolve the issues of increasing fiscal deficit, soaring expenditures, energy losses and low tax to GDP ratio. The long-term measures and effective steps can strengthen the national economy on a sustainable basis.

Credit:

Independent News Pakistan-INP