Climate finance: Pakistan to seek IMF’s EFF programme augmentation

ISLAMABAD: Pakistan will explore possibilities for augmentation of Extended Fund Facility (EFF) programme with climate finance on the sidelines of the upcoming annual meeting of IMF/World Bank scheduled to be held in Washington DC.

Islamabad may consider a request for augmentation of existing loans by adding $1.5 to $2 billion in the $7 billion Extended Fund Facility (EFF) programme which was approved and the first tranche was already disbursed by the IMF. So, the total size of the program might be $8 to $9 billion.

The 2024 Annual Meetings of the International Monetary Fund (IMF) and World Bank Group will convene in Washington DC from October 21 to 26, bringing together influential leaders from government, business, international organisations, civil society, and academia.

Minister for Finance Muhammad Aurangzeb told The News on Monday that he was on his way to Washington DC right now. “We will bring this up as a discussion point but it’s too early to talk about quantum,” the minister replied when asked about the request for climate finance during his visit to Washington DC to attend the annual meeting of Breton Wood Institutions known as the IMF/World Bank on Monday night.

Pakistan’s Minister for Finance Muhammad Aurangzeb along with his official entourage has left Islamabad for Washington DC to participate in the upcoming annual meeting of the IMF/World Bank with the possibility to discuss augmentation of Extended Fund Facility (EFF) programme.

There is one IMF instrument under the Resilience and Sustainability Facility (RSF) which provides affordable long-term financing to countries undertaking reforms to reduce risks to prospective balance of payments stability, including those related to climate change and pandemic preparedness.

By reducing prospective balance of payments risks, an RSF arrangement aims to contribute to longer-term Balance of Payment (BoP) stability. In some cases, the RSF arrangements may also have an impact on short and medium-term BoP needs.

The IMF staff should illustrate in programme documentation: Risks to prospective BoP stability that may entail longer-term BoP financing needs associated with the relevant longer-term structural challenge.

These risks are a qualification criterion for an RSF arrangement (though they are not related to access levels, which are governed by separate criteria). Leveraging diagnostics and available modelling tools, staff should strive to illustrate the challenges to prospective BoP stability and substantiate the relevance of the proposed package of reforms to mitigating these prospective risks. Quantification, if feasible, is expected, but not required given inherent challenges. Where relevant, any direct short to medium-term BoP financing needs arising from the implementation of RSF-supported reforms. Staff should provide precise estimates and include them in the fiscal or BoP frameworks. Any positive impact on the BoP in the short-to-medium term from RSF-supported reforms should also be captured to the extent possible.

Under RSF, the IMF makes it mandatory that the debt must be assessed as sustainable over the medium term for staff to recommend and the Board to approve a new RSF request, augmentation of access, and completion of reviews under RSF arrangements.