KARACHI: IMF staff and Pakistani authorities have reached a staff-level agreement on the first review under Pakistan’s Extended Fund Facility (EFF) and on a new arrangement under the Resilience and Sustainability Facility (RSF), the IMF said on Tuesday. 

Islamabad secured the $7 billion EFF last summer to help claw its way out of an economic crisis, with an immediate disbursement of about $1 billion.

“The strong implementation of the EFF-supported program continues, and the authorities remain committed to advancing a gradual fiscal consolidation to sustainably reduce public debt, maintaining a sufficiently tight monetary policy to keep inflation low, accelerating cost-reducing energy sector reforms to enhance its viability, and implementing Pakistan’s reform agenda to accelerate growth, while strengthening social protection and health and education spending,” the IMF said in a statement as it announced the staff-level agreement. 

The agreement comes after an IMF team led by Nathan Porter held discussions from February 24-March 14 in Karachi and Islamabad.

The review will ensure “total access over the 28 months of around $1.3 billion,” the IMF said.

“The staff-level agreement is subject to approval of the IMF’s Executive Board. Upon approval, Pakistan will have access to about $1.0 billion (SDR 760 million) under the EFF, bringing total disbursements under the program to about $2.0 billion.”

Porter said over the past 18 months, Pakistan had made significant progress in restoring macroeconomic stability and rebuilding confidence despite a challenging global environment. 

“While economic growth remains moderate, inflation has declined to its lowest level since 2015, financial conditions have improved, sovereign spreads have narrowed significantly, and external balances are stronger,” the statement said. 

Porter said it was critical to entrench the progress achieved over the past one and a half years, building resilience by further strengthening public finances, ensuring price stability, rebuilding external buffers and eliminating distortions in support of stronger, inclusive and sustained private sector-led growth.

The IMF program has played a key role in stabilizing Pakistan’s economy and the government has said the country is on course for a long-term recovery.

Meanwhile, the RSF will support Pakistan’s efforts in building resilience to natural disasters, enhancing budget and investment planning to promote climate adaptation, improving the efficient and productive use of water, strengthening the climate information architecture to improve disclosure of climate risks, and aligning energy sector reforms with mitigation targets.