IMF Executive Board Concludes 2021 Article IV Consultation for Pakistan and Completes the Sixth Review of the Extended Fund Facility

By Antoinette M. Sayeh
Published in on February 02, 2022

  • The Executive Board of the International Monetary Fund (IMF) concluded the 2021 Article IV Consultation with Pakistan. The Executive Board also completed the sixth review under the Extended Fund Facility (EFF) for Pakistan, allowing the authorities to draw the equivalent of SDR 750 million (about US$1 billion). This brings total purchases for budget support under the program to SDR 2,144 million (about US$3 billion, or 106 percent of quota).
  • Economic activity rebounded strongly from the first waves of the ongoing COVID-19 pandemic, however, pressures also started to build, reflected in a widening current account deficit and rising inflationary pressures. The authorities’ recent economic and financial policy efforts were appropriate to safeguard macroeconomic stability and debt sustainability.
  • Further ambitious efforts to remove structural impediments and facilitate the structural transformation of the economy will help unlock sustainable and resilient growth, foster job creation, and improve social outcomes for the benefit of all Pakistani citizens.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the 2021 Article IV consultation [1] (press release to follow) and the sixth review of the extended arrangement under the Extended Fund Facility (EFF) for Pakistan. The completion of the review allows the authorities to draw the equivalent of SDR 750 million (about US$1 billion), bringing total purchases for budget support under the program to SDR 2,144 million (about US$3 billion, or 106 percent of quota).

The EFF was approved by the Executive Board on July 3, 2019 (see Press Release No. 19/264 ) for SDR 4,268 million (about US$6 billion at the time of approval, or 210 percent of quota). The program aims to support Pakistan’s policies to help the economic recovery from the COVID-19 pandemic, ensure macroeconomic and debt sustainability, and advance structural reforms to lay the foundations for strong, job-rich, and long-lasting growth that benefits all Pakistanis.

Pakistan entered the COVID-19 pandemic with strengthened buffers, following the approved EFF program. A strong economic recovery has gained hold since summer 2020, benefiting from the authorities’ multifaceted policy response to the unprecedented shock. At the same time, external pressures also started to emerge in 2021, including a widening current account deficit and depreciation pressures on the exchange rate which also reinforced domestic price pressures.

The recent policy adjustment was appropriate to address these challenges and maintain economic stability. The economy is set to continue recovering in FY 2022, with real GDP growth projected at 4 percent, while inflation is expected to pick up this year before gradually slowing down. Continued commitment to a market-determined exchange rate and a prudent macroeconomic policy mix will help reduce the current account deficit, and ease external pressures over the medium term.

However, Pakistan remains vulnerable to possible flare-ups of the pandemic, tighter international financial conditions, a rise in geopolitical tensions, as well as delayed implementation of structural reforms. Strengthening the medium-term outlook hinges on ambitious efforts to remove structural impediments and facilitate the structural transformation of the economy. To this end, increased focus is needed on measures to strengthen economic productivity, investment, and private sector development, as well as to address the challenges posed by climate change.

The Executive Board also approved today the authorities’ request for waivers of applicability and nonobservance of performance criteria.

Following the Executive Board’s discussion on Pakistan, Ms. Antoinette Sayeh, Deputy Managing Director and Acting Chair, issued the following statement:

“The Pakistani economy has continued to recover despite the challenges from the COVID-19 pandemic, but imbalances have widened and risks remain elevated. The authorities’ recent policy efforts to strengthen economic resilience are welcomed. Timely and consistent implementation of policies and reforms remain essential to lay the ground for stronger and more sustainable growth.

“The authorities have taken important measures to strengthen fiscal policy and put public finances on a sounder footing. Along with careful spending management, revenue mobilization will help to create space for much-needed spending on infrastructure and social protection, while improving debt sustainability. Maintaining the momentum on the reform of personal income taxation and harmonization of general sales taxes is essential. Broader reforms in tax administration and public financial and debt management are expected to further improve the fiscal framework.

“The adoption of amendments to the central bank Act is a welcome step toward strengthening its independence to pursue its mandates of price and financial stability. The recent monetary policy tightening was necessary and continued proactive, data-driven monetary policy would help to anchor inflation. Closer oversight of financial institutions to ensure they remain well capitalized would help to maintain financial stability. Preserving a market-determined exchange rate is crucial to absorb external shocks, maintain competitiveness, and rebuild reserves. The authorities are committed to removing the existing exchange restrictions and multiple currency practices when BOP conditions stabilize.

“Strong efforts to advance electricity sector reform are needed to restore the sector’s financial viability and address adverse spillovers on the budget, financial sector, and real economy. The IFI-supported Circular Debt Management Plan (CDMP) will help to guide the planned management improvements, cost reductions, alignment of tariffs with cost recovery levels, and better targeting of subsidies to the most vulnerable.

“Ambitious steps to remove structural impediments and facilitate structural transformation remain essential to boost growth and job creation and improve social outcomes. The authorities are focused on state-owned enterprises reform, fostering the business environment and reducing corruption, promoting financial inclusion; and addressing the challenges posed by climate change.”


Pakistan: Selected Economic Indicators, 2018/19–2021/22 1/
Population: 212.5 million (2020/21) Per capita GDP: US$1,394.1 (2020/21)
Quota: SDR 2,031 million Poverty rate: 21.9 percent (natl. line; 2018/19)
Main exports: Textiles (US$15.4 billion, 2020/21)
Key export markets: European Union, United States, United Arab Emirates
2018/19 2019/20 2020/21 2021/22
Est. Proj.
Real GDP at factor cost (% change) 2.1 -0.5 3.9 4.0
Consumer prices, period average (%) 6.7 10.7 8.9 9.4
Consumer prices, end of period (%) 8.0 8.6 9.7 10.2
General government finances
Revenue and grants (% GDP) 13.0 15.2 14.5 15.9
Expenditure (% GDP) 21.9 23.2 21.6 22.8
Budget balance, including grants (% GDP) -9.0 -8.0 -7.1 -6.9
Budget balance, excluding grants (% GDP) -9.0 -8.1 -7.1 -6.9
Primary balance, excluding grants (% GDP) -3.6 -1.8 -1.4 -1.3
Underlying primary balance (excluding grants) 2/ -3.6 -1.8 -0.6 0.0
Total general government debt excl. IMF obligations 82.9 84.5 81.1 78.9
External general government debt 28.5 28.4 26.1 27.0
Domestic general government debt 54.4 56.0 55.1 51.9
General government debt incl. IMF obligations (% GDP) 85.3 87.6 83.6 82.0
General government and government guaranteed debt (incl. IMF; % GDP) 90.5 93.2 88.6 86.7
Monetary and credit
Broad money (% change) 11.3 17.5 16.2 15.8
Private credit (% change) 11.9 3.0 11.5 16.0
Six-month treasury bill rate (%) 3/ 10.2 11.9 7.3
Balance of Payments
Current account balance (% GDP) -4.9 -1.7 -0.6 -4.0
Foreign Direct Investment (% GDP) 0.5 1.0 0.6 0.8
Gross reserves (in millions of U.S. dollars) 4/ 7,274 12,175 17,297 21,211
In months of next year’s imports of goods and services 1.7 2.4 2.7 3.2
Total external debt (% GDP) 37.4 41.6 39.1 40.6
Exchange rate
Real effective exchange rate (% change) -15.1 3.4 7.3
Sources: Pakistani authorities; World Bank; and IMF staff estimates and projections.
1/ Fiscal year ends June 30. Revised FY 2019 and FY 2020 GDP as well as provisional FY 2021 GDP were published by the authorities in May 2021, affecting ratios.
2/ Excludes one-off transactions, including asset sales. In FY 2021 it excludes PHPL debt clearance, IPPs related arrears clearance, and COVID-19 spending; in FY 2022 it excludes IPPs related arrears clearance and COVID-19 spending.
3/ Period average.
4/ Excluding gold and foreign currency deposits of commercial banks held with the State Bank of Pakistan.

[1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board

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