International Monetary Fund (IMF) and Pakistan loan history

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

  Facility Date of  Expiration Amount  Amount  Amount 
    Arrangement Date Agreed Drawn Outstanding
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
  Total     19,388,650 13,795,045 4,363,000

 

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
  • Euro
  • 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.

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