All targets met, says IMF as Pakistan’s circular debt comes into focus

A staff mission of the International Monetary Fund (IMF) on November 8, 2019, concluded its visit to Pakistan with all praise to authorities for over-performing on first-quarter objectives under the $6 billion Extended Fund Facility to enable the disbursement of $450 million early next month.

“The Pakistani authorities and IMF staff have reached a staff-level agreement on policies and reforms needed to complete the first review under the EFF. The agreement is subject to approval by IMF management and the Executive Board of Directors,” the IMF mission head said in a statement.

“Completion of the review will enable disbursement of SDR 328 million (or around US$ 450 million) and will help unlock significant funding from bilateral and multilateral partners,” the statement added.

The mission led by  Ernesto  Ramirez-Rigo,  however, mentioned a couple of minor shortcomings that authorities would need to deliver before the IMF executive board takes up for formal approval of the staff-level agreement. These  related to power sector tariffs and effective taxation on cigarettes.

The Fund also lowered inflation outlook for FY20 at 11.8 percent average against its 13pc estimate only a few days ago as part of its regional economic outlook.

That, in a sense, was a hint for the possibility of lower discount rates in the coming monetary policy by the end of this month. The saving rates have already been lowered this week following a decline in secondary market yields on bonds.

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