Islamabad:
In a diplomatic shame for India, the Executive Board of the International Monetary Fund approved on Friday two packages worth $ 2.4 billion, including a new installation of $ 1.4 billion to mitigate climate challenges.
The global lender approved the second section of loans worth $ 1 billion of the installation of extended funds and sanctioned a new center of resistance and sustainability of $ 1.4 billion (RSF), said Pakistani authorities. The IMF Board approved the agreements rejecting the unjustified objections of India to the financing package. New Delhi in total contempt for the IMF letter tried to politicize the balance of the support installation.
Pakistan’s economic team, Finance Minister Muhammad Aurengzeb, and mainly his secretary Finance Imdad Ullah Bosal, put a lot of work in maintaining the program on the way after the initial setbacks. The Vice Prime Minister Ishaq Dar used his good terms with the Popular Party of Pakistan to meet some pending conditions, including the introduction of agricultural income tax laws in Sindh and Baluchistan.
The IMF would immediately launch the loan stretch of $ 1 billion under the EFF, while the $ 1.3 billion would be disbursed for a period of the next 28 months. With the approval of the section of $ 1 billion due to the best fiscal yield of Pakistan, the total disbursements under the EFF would reach $ 2.1 billion.
The section would once again increase the gross reserves of official foreign currencies of Pakistan to $ 11 billion. The best performance of the expected of foreign remittances has also helped maintain reservations in two digits despite making some important reimbursements of foreign debt.
Prime Minister Shehbaz Sharif showed satisfaction with the approval of the $ 1 billion section while denouncing the dirty tricks of India to block the approval.
The IMF did not give Pakistan a favor by approving these loans, since being the member of the fund that the country has the right to find a program. Islamabad was classified for the section only after complying with the difficult conditions that the IMF had established, including the presentation of more load for people.
The agreements were reached after both parties made some adjustments in the 25th Installation of Extended Funds (EFF), including the reduction of fiscal objectives in absolute terms, establishing a new deadline to cut the background of Pakistan’s sovereign wealth and open the economy to foreign companies.
India undertook an reckless movement to block approval despite having only 2.7% of voting rights, the second defeat in less than 72 hours after losing five combat planes against the upper Air Force of Pakistan.
The sources said that during the meeting of the Board, the Indian representatives tried to block the approvals arguing that Pakistan was a usual borrower. The Indian representative argued that the IMF programs designs were ineffective or there were problems with monitoring.
However, the IMF approved both packages for the argument that Pakistan successfully fulfilled all the conditions established by the Board to qualify the second section of loan.
Pakistan will also impose the carbon tax as part of the conditions of the new program of $ 1.3 billion with effect as of July of this year and increase the charges of water use from next year as part of the conditions for the new installation.
About two months ago, the IMF team had reached an agreement at the personnel level with the Pakistani authorities in the first review of the extended agreement of 37 months under the EFF, and in a new 28 -month agreement under the installation of resistance and sustainability of the IMF (RSF) with total access during the 28 months of around $ 1.3 billion.
Pakistan would continue fiscal consolidation to reduce public debt while creating space for social spending and development and reduces the overcrowding of private investment. Pakistan will also refrain from increasing current expenditure beyond that budget, indicating that complementary subsidies cannot be issued.
The IMF has projected Pakistan’s economic growth for this fiscal year with 2.6%, but the prognosis of the inflation rate has been reduced to 5.1%. For next fiscal year, the IMF sees the economic growth of 3% and inflation of around 7.7%.
The IMF has recognized economic stabilization, but said there were still risks to Pakistan’s economy. Among the risks are possible macroeconomic policy landslides, driven by pressures to relieve policies, together with geopolitical clashes for basic products prices, adjustment of global financial conditions or increased protectionism could undermine macroeconomic stability won with problems.
The new IMF climatic installation is intended to expand climate reform efforts to reduce vulnerabilities to natural disaster risks and develop climate resilience. In exchange for the loan, Pakistan has promised to strengthen public investment processes at all levels of government to prioritize projects that improve disaster resilience, Porter said.
The Government will also improve the efficiency of low use of water resources, even through better price mechanisms, he added.
Will improve intergovernmental coordination in disaster financing; Improve information architecture and dissemination of financial and corporate risks related to climate; And promote green mobility to mitigate significant pollution and adverse health impacts, said the IMF.
