ISLAMABAD: The International Monetary Fund (IMF) and the government reached a staff-level agreement on policies and reforms needed to complete the first review under the Extended Fund Facility (EFF).

The agreement is subject to approval by IMF management and the Executive Board of Directors, according to a press release issued by the mission upon completion of the review that will enable “disbursement of SDR 328 million (or around US$ 450 million) and will help unlock significant funding from bilateral and multilateral partners.”

The IMF said the government’s policies have started to bear fruit, helping to reverse the buildup of vulnerabilities and restore economic stability.

“The external and fiscal deficits are narrowing, inflation is expected to decline, and growth, although slow, remains positive,” it added.

An IMF mission led by Ernesto Ramirez Rigo visited Islamabad from October 28 to November 8 to conduct discussions on the first review under the EEF.

At the end of the visit, Ramirez Rigo said: “Despite a difficult environment, program implementation has been good, and all performance criteria for end-September were met with comfortable margins.”

He said significant progress has been made in improving the Anti-Money Laundering and Financing of Terrorism (AML/CFT) framework, although additional work is needed before March 2020.

The mission chief said,“On the macroeconomic front, signs that economic stability is gradually taking hold are steadily emerging. The external position is strengthening, underpinned by an orderly transition to a flexible, market-determined exchange rate by the State Bank of Pakistan (SBP) and a higher-than-expected increase in SBP’s net international reserves.”

“Budgetary revenue collections are growing on the back of efforts on tax administration and policy changes, and despite the ongoing compression in import-related taxes. Inflation pressures are expected to recede soon, reflecting an appropriate monetary stance. Importantly, measures to strengthen the social safety net are being implemented, and development spending is been prioritized,” he added.

He said the near-term macroeconomic outlook is broadly unchanged from the time of the program approval, with gradually strengthening activity and average inflation expected to decelerate to 11.8 percent in FY2020. However, domestic and international risks remain, and structural economic challenges persist.

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