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IMF approves extra $3.2bn for Pakistan

* Islamabad, IMF agree on schedule to increase electricity tariffs
* Extends financial agreement until end of 2010

By Sajid Chaudhry

ISLAMABAD: The International Monetary Fund (IMF) Executive Board on Friday agreed to increase its lending to Pakistan by an extra $3.236 billion to fund immediate spending and help the government provide assistance to nearly three million internally displaced persons following security operations in Swat and Malakand.

Increase expected: According to an announcement by the IMF, Pakistan and the international organisation had also agreed on a schedule to increase electricity tariffs in the course of the ongoing fiscal year and eliminate tariff differential subsidies in the next fiscal year as per the agreement reached between Pakistan and the World Bank as well as the Asian Development Bank.

The board reviewed the progress made under last year’s $7.6 billion stand by arrangement for Islamabad and noted the steps the government was taking to stabilise the economy in the face of difficult security challenges and global economic conditions.

More time: The IMF also approved the extension in the financing arrangement until the end of 2010, which was originally approved for 23 months on November 24, 2008.

Islamabad would also benefit from the proposed allocation of Special Drawing Rights, which would supplement its reserves.

According to the IMF, the board also approved Pakistan’s request for a waiver for the non-observance of two end-June 2009 structural performance criteria on submission to parliament of legislative amendments to (i) enhance the effectiveness of the State

Bank of Pakistan in banking supervision; and (ii) to harmonise the income tax and sales tax laws and reduce exemptions for both taxes.

The board also approved Pakistan’s request for a waiver for non-observance for the end-June quantitative performance criterion on the fiscal deficit.

Murilo Portugal, deputy managing director and acting chair, said, “Pakistan’s economy has continued to stabilise. Reforms in the financial sector and the foreign exchange market have been progressing, and steps have been taken to strengthen the social safety net.”

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