International Monetary Fund (IMF) and Pakistan’s relation spans over several decades now. IMF has 189 member countries. It ensures stability of money system, exchange rate, international trade and international payments. In 2012 its scope was expanded to all macroeconomic issue of economies and financial issues in global monetary system.
This fund helps countries by lending money and assisting in making required policies.
Pakistan became a member of IMF on July 11, 1950.
Since then there have been 21 arrangements with IMF.
Pakistan has reached another staff level agreement for 22nd Extended Fund Facility program for a span of three years 2019-2022.
IMF programs in Pakistan: Lending arrangements
Amounts are in thousands of SDR’S
|1||Extended Fund Facility||Sep 04, 2013||Sep 30, 2016||4,393,000||4,393,000||4,363,000|
|2||Standby Arrangement||Nov 24, 2008||Sep 30, 2011||7,235,900||4,936,035||0|
|3||Extended Credit Facility||Dec 06, 2001||Dec 05, 2004||1,033,700||861,420||0|
|4||Standby Arrangement||Nov 29, 2000||Sep 30, 2001||465,000||465,000||0|
|5||Extended Credit Facility||Oct 20, 1997||Oct 19, 2000||682,380||265,370||0|
|6||Extended Fund Facility||Oct 20, 1997||Oct 19, 2000||454,920||113,740||0|
|7||Standby Arrangement||Dec 13, 1995||Sep 30, 1997||562,590||294,690||0|
|8||Extended Credit Facility||Feb 22, 1994||Dec 13, 1995||606,600||172,200||0|
|9||Extended Fund Facility||Feb 22, 1994||Dec 04, 1995||379,100||123,200||0|
|10||Standby Arrangement||Sep 16, 1993||Feb 22, 1994||265,400||88,000||0|
|11||Structural Adjustment Facility Commitment||Dec 28, 1988||Dec 27, 1991||382,410||382,410||0|
|12||Standby Arrangement||Dec 28, 1988||Nov 30, 1990||273,150||194,480||0|
|13||Extended Fund Facility||Dec 02, 1981||Nov 23, 1983||919,000||730,000||0|
|14||Extended Fund Facility||Nov 24, 1980||Dec 01, 1981||1,268,000||349,000||0|
|15||Standby Arrangement||Mar 09, 1977||Mar 08, 1978||80,000||80,000||0|
|16||Standby Arrangement||Nov 11, 1974||Nov 10, 1975||75,000||75,000||0|
|17||Standby Arrangement||Aug 11, 1973||Aug 10, 1974||75,000||75,000||0|
|18||Standby Arrangement||May 18, 1972||May 17, 1973||100,000||84,000||0|
|19||Standby Arrangement||Oct 17, 1968||Oct 16, 1969||75,000||75,000||0|
|20||Standby Arrangement||Mar 16, 1965||Mar 15, 1966||37,500||37,500||0|
|21||Standby Arrangement||Dec 08, 1958||Sep 22, 1959||25,000||0||0|
What is SDR?
The above amounts are in Special Drawing Rights (SDR) which is an international reserve assets of IMF which are additional to any member county’s reserve. At the moment it consists of five currencies:
- S Dollar
- Chinese Renminbi
- Japanese Yen
- British Pound Sterling
It was created after countries shifted to floating exchange rate system after Bretton woods system. Its exchange rate is determined as U.S. Dollar rate prevailing on at noon London time. Earlier it was based on gold 1SDR was equivalent to 0.888671 grams of fine gold which was pegged to U.S Dollar. Exchange rate is reviewed daily while currency basket is reviewed every five years.
Types of Lending:
IMF has different type of lending instruments for a diverse kind of problems. It also gives a set of policy to make necessary changes in economy. They are usually customized to local circumstances.
- IMF Support for Low Income Country: This is lent to facilitate Poverty Reduction and Growth Trust
- Standby-By Arrangements: This is to assist emerging and advance economies in crises. (It accounts for largest assistance of IMF)
- Standby Credit Facility: This is to assist low income countries with Zero interest rate.
- Extended Fund Facility: This is to support low income countries facing balance of payment issues with medium term program.
- Extended Credit Facility: This is to support low income countries facing balance of payment issues with medium term program.
- Flexible Credit Line: This is assist countries who already have sound policies but do not have market confidence or there is some uncertainty or heightened risk in market.
- Precautionary and Liquidity Line: This is assist countries who already have sound policies but do not have market confidence or there is some uncertainty or heightened risk in market.
- Rapid Financing Instrument: This is used to assist low income countries who need rapid assistance during balance of payment needs, commodity price shocks, natural disaster and natural fragilities.
- Rapid Credit Facility: This is used to assist low income countries who need rapid assistance during balance of payment needs, commodity price shocks, natural disaster and natural fragilities.
What is process of getting money?
- IMF and member country team holds discussion on program of economic policies.
- They agree on policy conditionality
- Letter of intent with detailed Memorandum of Understanding is presented to IMF’s Executive Board
- After approval monitoring mechanism is placed and money is disbursed in trenches.
IMF deals with financial balance of payments and economic policy intervention to reduce risk of the same issues arising again in economy.
Where Pakistan stands?
Pakistan has applied for assistance of over 6 Billion Dollars for 3 years on interest rate of 3.2 but it is subject to review by IMF’s executive board.
In a press conference on 25th May 2019, Advisor to Prime Minister Imran khan for Finance Mr Hafeez Sheikh said he aims to stabilize economy in next 8-12 months. Budget to be presented on June 11, 2019 will reflect austerity, reduction in electricity loses, increase in tax base, bringing tax amnesty, new Pakistan housing scheme, 100 billion rupee loans for entrepreneurship under Kamyab nojwan loan scheme, 925 billion rupee injection in Public Sector Program (PSDP) is to further consolidate gains and achieve growth.
Aims are high, plans are in place but will the government be able to deliver? Time will give the answer.