Islamabad
Pakistan has formally requested the International Monetary Fund (IMF) for extension of almost one month in expiry of existing $6.64 billion Extended Fund Facility (EFF) in order to have sufficient time to conduct detailed discussions for the final review of the programme, The News has learnt.
The IMF’s Executive Board, which is scheduled to meet on June 27 at Washington DC, will consider approval of next tranche worth $500 million for Pakistan as well as granting one month extension in expiry of the EFF arrangement.
When the IMF’s spokesman was contacted in Islamabad on Wednesday, he said that originally, the EFF arrangement was scheduled to expire on September 3. “The authorities have requested a short extension of the arrangement until September 30, 2016 to allow sufficient time to conduct discussions for the final review. Extension of the arrangement beyond September 2016 has not been discussed and is not scheduled for consideration by the Board,” he said.
When contacted, Federal Minister for Finance Ishaq Dar told The News that Pakistan would be concluding the IMF programme after end June 2016 which would be last review to be concluded in September 2016. He further said that programme's last quarter is 30th June, 2016. It takes 10/11 weeks to conclude staff / management/ board levels reviews, he added.However, the IMF’s Executive Board will consider completion of 11th review and approval of 12th tranche worth $500 million for Pakistan under the $6.46 billion EFF. The Fund’s Executive Board is also set to consider Pakistan’s request for modification of performance criteria and extension of the extended arrangement.
Minister for Finance Ishaq Dar had already unveiled government’s plan to say goodbye to the IMF after expiry of existing EFF arrangement because the government had achieved objective of stabilising the economy by improving public finances and building up foreign currency reserves. The budget deficit, which stood at 8.2 percent of GDP in 2013, has come down to 4.3 percent of GDP while the foreign currency reserves reached highest level in recent weeks by touching $21.4 billion on June 10, 2016.
Now the final review under the EFF programme would be scheduled for end July or early August 2016 probably outside Pakistan but venue of the meeting was not finalised yet.
However, without seeking fresh bailout package from the IMF, Pakistan will become eligible for post programme monitoring (PPM) by continuously experiencing scrutiny of the Fund staff on its economic front for two more years even after expiry of the existing $6.4 billion EFF.
Regarding PPM, the Fund states on its website that the IMF financing provides member countries with the breathing space they need to correct balance of payments problems. A policy programme supported by the IMF financing is designed by the national authorities in close cooperation with the IMF. Continued financial support during the programme is conditional on the effective implementation of the policies. A country’s return to economic and financial health during the programme and in the medium term ensures that IMF funds are repaid, and can be made available to other member countries. Post-programme monitoring is intended to help ensure the continued viability of a country’s economy after its IMF-supported programme has expired.
Current policy presumes that a member country will engage in post-programme monitoring with the IMF after its programme has expired when its outstanding credit exceeds 100 percent of its quota, and when it no longer has programme involvement of any kind with the IMF.
In some cases, post-programme monitoring may not be needed even if the country’s outstanding credit exceeds 100 percent of quota. This applies when a successor borrowing arrangement or a staff-monitored programme is expected to be in place within six months of the expiration of the current programme, or when the policies and external position of the member country are deemed to be strong.
In other cases, post-programme monitoring may be required even if the country’s outstanding credit is below 100 percent of its quota. This occurs if economic developments call into question the country’s progress towards external viability.
The IMF’s 24-member Executive Board can decide on post-programme monitoring for a country at any time during the programme or after the programme expires. However, the decision is normally taken at the time of the last programme review when the country’s outstanding credit is expected to exceed the threshold of 100 percent of quota.
Under post-programme monitoring, countries undertake more frequent formal consultations with the IMF than is the case under the IMF’s normal surveillance, with a particular focus on macroeconomic and structural policies that have implications for external viability. There are normally two post-programme monitoring board consultations during a 12-month period.
Post-programme monitoring remains in effect until outstanding credit falls below the threshold of 100 percent of quota. Nonetheless, the IMF’s Executive Board could agree to discontinue the monitoring - even before outstanding credit falls below the threshold - if strong policies are in place and the external position is sound. In cases where post-programme monitoring is found to be required even though outstanding credit is below 100 percent of quota, the monitoring will normally be carried out for one year.