News Brief No. 99/23

News Brief: IMF Completes Review and Approves US$51 Million Credit Tranche for Pakistan

May 25, 1999

Alassane Ouattara, Deputy Managing Director of the International Monetary Fund (IMF) said: "I am pleased to announce, that in support of the Pakistan government’s economic program, the IMF’s Executive Board approved the completion of the third review under the Extended Fund Facility (EFF)¹ and the release of the next SDR 37.91 million (about US$51 million) credit tranche. Including this release, Pakistan to date has drawn SDR 113.75 million (about US$153 million) under the EFF, with a further SDR 341.18 million (about US$459 million) available in the period to October 2000.

Ouattara said that policy implementation had largely remained in line with program commitments since the last review was conducted in January 1999. "This has helped strengthen investor confidence, eased pressures in the foreign exchange market, and kept inflation under check. I welcome the recent unification of the exchange rate system. Despite these favorable developments, Pakistan’s macroeconomic situation remains difficult. Fiscal consolidation and the restructuring of the budget remain central to the success of the program. Resolute action is needed to broaden the tax base and further strengthen tax enforcement. The authorities also need to accelerate structural reforms to build a solid foundation for high economic growth in the medium-term. Important steps have been taken in strengthening the prudential and regulatory framework of the banking system, and some progress has been made with power sector reform. I strongly encourage the authorities to resolvethe outstanding issues with Independent Power Producers and complete the restructuring of the power sector without delay. Pakistan has also made important progress in normalizing relations with creditors. I encourage the authorities to move expeditiously in concluding bilateral arrangements with Paris Club creditors, and seek comparable treatment from all other bilateral, commercial and private creditors. All these measures will help in restoring investor confidence in Pakistan. In that context, it is important for the authorities to focus on issues of good governance and transparency."