The International Monetary Fund (IMF)’s Executive Board on Wednesday approved the loan tranche of $1 billion of its $6 billion Extended Fund Facility (EFF) programme for Pakistan.

The Executive Board held its meeting in Washington to consider Pakistan 2021 Article IV Consultation, sixth review under the Extended Arrangement, under the Extended Fund Facility, and Requests for Waivers of Non-observance of Performance Criteria and Rephasing of Access.

With the approval of $1 billion tranche, total disbursements under the EFF will increase to $3 billion. The release of the remaining $3 billion will subject to completion of the remaining programme reviews.

Finance Minister Shaukat Tarin on Wednesday took to twitter and announced, “I am pleased to announce that the IMF board has approved sixth loan tranche of its programme for Pakistan”.

Minister for Information and Broadcasting Chaudhry Fawad Hussain also said that the Executive Board of IMF had decided to release $1 billion tranche to Pakistan after completing sixth review of the country.

“Alhamdulillah, the IMF board has completed sixth review board of Pakistan and decided to release $1billion tranche to Pakistan,” the minister tweeted. He said the decision would not only help stabilize the economy, but also ensure completion of reforms process.

Pakistan and the IMF had reached a staff-level agreement on policies and reforms needed to complete the sixth review under the $6 billion EFF and issued a press statement on November 21, 2021.

The staff-level agreement was subject to approval by the Executive Board, following the implementation of prior actions, mainly on fiscal and institutional reforms.

The government has passed the two critical bills including the Finance (supplementary) Bill and the State Bank of Pakistan (SBP) Amendment Bill, 2021 from the parliament, as the prior conditions needed for the sixth review of the $6 billion EFF to get cleared by the IMF’s executive board.

The government had committed to the IMF that Pakistan will complete all “prior actions” before the board of directors meeting to approve the revival of $6bn EFF.

Under those prior actions, the government, through the supplementary finance bill, will make fiscal adjustment during the remaining part of the current fiscal year through a 22 per cent cut in development funds, about Rs343 billion worth of withdrawal of tax exemptions with a revised tax target of Rs6.1 trillion and increase in petroleum levy on major petroleum products by Rs4 per litre per month.

The government has already increased electricity prices. In May 2019, Pakistan and the IMF reached a staff-level agreement on economic policies for a three-year EFF. Under the agreement, Pakistan was to receive about US$6 billion for a period of 39 months.

This report was first published in Business Recorder on Feb 3, 2022.