In a breakthrough, Pakistan and the International Monetary Fund (IMF) reached a staff-level agreement over the revival of the Extended Fund Facility (EFF) programme, Ministry of Finance sources said on Wednesday.
A well-placed source within the Ministry of Finance said that an agreement has finally been reached with IMF and the lender will release an official statement regarding the deal this evening.
“The first tranche is expected to be SDR894 million, equal to $1.2 billion. The program has been extended till July 2023, and total program size increased by $1 billion to $7 billion,” they said.
Last month, Pakistan received the Memorandum of Economic and Financial Policies (MEFP) from the International Monetary Fund for the seventh and eighth reviews. This was confirmed by Finance Minister Miftah Ismail on his official Twitter handle.
The MEFP is a document that contains details regarding striking a staff-level agreement.
Pakistan unveiled a Rs 9.5 trillion ($47 billion) budget for 2022-23 last month aimed at tight fiscal consolidation in a bid to convince the IMF to restart much-needed bailout payments.
However, the lender later said additional measures were needed to bring Pakistan’s budget in line with the key objectives of the IMF programme.
The two sides held several meetings and agreed on the budget and fiscal measures.
Pakistan had sought an increase in the size and duration of the programme when Ismail met with IMF officials in Washington in April.
Pakistan entered the IMF programme in 2019, but only half the funds have been disbursed to date as Islamabad has struggled to keep targets on track.
The last disbursement was in February and the next tranche was to follow a review in March, but the government of ousted prime minister Imran Khan introduced costly fuel price caps which threw fiscal targets and the programme off track.
Pakistan’s new government has removed the price caps, with fuel prices going up at the pump by up to 70 per cent in a matter of three weeks.