Additional $1.4 bn lending through RFI: IMF assures help to Pakistan

ISLAMABAD: In response to Pakistan’s quest for seeking an additional $1.4 billion lending through the separate Rapid Financing Instrument (RFI), the IMF’s Managing Director, Kristalina Georgieva, has assured the country that the Fund stood ready to extend its support to Pakistan.

The IMF program of $6 billion under 39 months Extended Fund Facility (EFF) was already underway and Islamabad has so far completed the first review while approval of the second review and release of the third tranche worth $450 million was still awaited. It is expected that the third tranche under the IMF program will be approved by Fund’s Executive Board next month probably on April 10, 2020.

Now Pakistan has made a fresh request for getting $1.4 billion through the separate RFI facility. “Our team is working expeditiously to respond to this request so that a proposal can be considered by the IMF’s Executive Board as soon as possible,” the IMF’s Managing Director, Kristalina Georgieva, stated in a statement issued from the Fund’s Headquarters Washington D.C on Friday.

When contacted, the IMF’s Resident Chief in Pakistan, Teresa Daban Sanchez, said: “The RFI is a separate facility subject to fast track arrangement to provide countries with capacity to respond quickly to the COVID-19 shocks. The IMF team will work hard to make it available to Pakistan as soon as possible,” she added.

The IMF MD states, “The authorities have continued their reform efforts to address Pakistan’s economic challenges, but progress is being threatened by the devastating effects of the COVID-19 outbreak and the deterioration in global economic and financial conditions. Prime Minister Khan and his government have swiftly approved an economic stimulus package aimed at containing the spread of the virus and providing support to affected families and businesses. Similarly, the State Bank of Pakistan has adopted a timely set of measures, including a lowering of the policy rate, new refinancing facilities to support the flow of credit, and temporary regulatory relief measures.”

She said, “To support these efforts and ensure prompt and adequate relief to the people and the economy, the Government of Pakistan has requested financial assistance under the Fund’s Rapid Financing Instrument (RFI). This emergency financing will allow the government to address additional and urgent balance of payments needs and support policies that would make it possible to direct funds swiftly to Pakistan’s most affected sectors, including social protection, daily wage earners, and the healthcare system. Our team is working expeditiously to respond to this request so that a proposal can be considered by the IMF’s Executive Board as soon as possible.

“In parallel, the authorities have reaffirmed their commitment to the reform policies included in the current arrangement under the Extended Fund Facility (EFF). These reforms are crucial to boost Pakistan’s growth potential to deliver broad based benefits for all Pakistanis, especially the most vulnerable segments of the population.

“The Fund stands ready to continue to support the authorities’ efforts to implement much-needed economic and structural reforms aimed at fostering strong and sustainable growth” the IMF MD added.

The IMF’s RFI facility provides rapid and low-access financial assistance to member countries facing an urgent balance of payments need, without the need to have a full-fledged program in place. It can provide support to meet a broad range of urgent needs, including those arising from commodity price shocks, natural disasters, conflict and post-conflict situations, and emergencies resulting from fragility. As a single, flexible, mechanism with a broad coverage, the RFI replaced the IMF’s previous policy that covered the Emergency Natural Disaster Assistance (ENDA) and Emergency Post-Conflict Assistance (EPCA).

The RFI is available to all member countries, although PRGT-eligible member countries are more likely to use the similar concessional Rapid Credit Facility (RCF). The RFI is designed for situations where a full-fledged economic program is either not necessary nor feasible.

The former situation may arise when the shock is transitory and limited in nature, while the latter may arise when the member’s policy design or implementation capacity is limited, including due to the urgent nature of the balance of payments need or to fragilities.