The International Monetary Fund (IMF) has approved the second tranche of $452.4 million for Pakistan under the $6 billion bailout program for the country.
This brings the total disbursements to about $1.44 billion, the IMF said after completing the first review of Pakistan’s economic performance under the Extended Fund Facility (EFF) on Thursday.
While the IMF hailed Islamabad’s efforts to ensure economic stability, the lender said that the nation must ensure further implementation of reforms to support sustainable growth. Pakistan is set to complete tax reforms, taking measures including the elimination of tax exemptions and loopholes, as well as making changes in the state-owned enterprise sector.
“Pakistan’s program is on track and has started to bear fruit. However, risks remain elevated. Strong ownership and steadfast reform implementation are critical to entrench macroeconomic stability and support robust and balanced growth,” deputy head of the International Monetary Fund (IMF) David Lipton stated.
The official added that a flexible and market-determined exchange rate is necessary to “cushion the economy against external shocks and rebuild reserve buffers.”
The IMF approved a $6 billion 39-month EFF arrangement for Pakistan in July as the country faced significant economic challenges on the back of large fiscal and financial needs. The program requires Islamabad to take steps to reduce public debt, ensure the GDP growth and expand social spending, as well as implementing energy sector and structural reforms. The first tranche of the rescue package was released last month after the IMF completed its mission in the South Asian nation.
After Pakistan received the first part of the financial help, credit rating agency Moody’s raised the country’s outlook to stable from negative. The New York-based agency noted that it expects that the reforms under the IMF program will help to gradually narrow Pakistan’s fiscal deficit.
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