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The International Monetary Fund’s (IMF) board on Monday approved the seventh and eighth reviews of Pakistan’s bailout package, allowing more than $1.1 billion to be released to the cash-strapped economy.
The IMF agreed to extend the program for a year and increase the total funding by SDR 720 million, or about $940 million on current exchanges.
According to the country’s planning minister, the funds will be a lifeline for the South Asian country ravaged by devastating floods, causing at least $10 billion in damage.
Antoinette Sayer, deputy managing director of the International Monetary Fund, said in a statement that as Pakistan’s economy was “hit by unfavorable external conditions”, it was “necessary” to insist on the planned increase in fuel and energy duties. These include “spillover effects of the Ukraine war and domestic challenges, including easing policies that have led to uneven and unbalanced growth,” he noted.
Floods were not mentioned in the fund’s statement.
Pakistan’s foreign exchange reserves have fallen to the level of just one month’s exports, and its economy is battling a huge current account deficit and high inflation.
The fund’s announcement of the approval and disbursement came hours after Finance Minister Mifta Ismail tweeted.
The Expansion Fund Facility (EFF) program, which initially ran for 36 months, was worth $6 billion when approved in 2019. The scheme has been stalled since earlier this year as Islamabad struggles to meet targets set by lenders.
The IMF board also approved Pakistan’s request for an exemption for the country’s failure to meet certain criteria for the program.
Ismail also said the government had put the plan back on track through painful economic corrective measures, saving Pakistan from defaulting.
The approval by the IMF board will open up other multilateral and bilateral financing channels for Pakistan, which are awaiting clean health certificates from lenders.
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