ISLAMABAD: The International Monetary Fund has announced that it would consider Islamabad’s request for financial assistance under IMF’s Rapid Financing Instrument (RFI) facility to shore up the country’s foreign exchange reserves and budgetary support in the wake of the adverse impact of the coronavirus pandemic on its economy.

“Our team is working expeditiously to respond to this request so that a proposal can be considered by the IMF’s executive board as soon as possible,” said IMF Managing Director Kristalina Georgieva in a statement released to the media by the Fund’s Islamabad-based office on Friday.

On the sidelines of the government economic team’s media briefing on March 25, Adviser to the Prime Minister on Finance Dr Hafeez Shaikh had announced that Pakistan had arranged about $4 billion additional financial assistance from multilateral lending and aid agencies, including $1.4bn additional funds from the IMF. Soon after the announcement, Ms Georgieva has confirmed Pakistan’s request for financial assistance under the RFI to ensure prompt and adequate relief to the people and the economy. This emergency financing, the IMF chief said, would allow the government to address additional and urgent balance of payments needs and support policies that would make it possible to direct funds swiftly to the country’s most affected sectors, including social protection, daily-wage earners and the healthcare system.

On March 4, the IMF had announced that it would support vulnerable countries with different lending facilities, including through rapid-disbursing emergency financing, which could amount up to $50 billion for low-income and emerging markets. Of this, $10bn is available at zero interest for the poorest members through the Rapid Credit Facility (RCF).

It is worth mentioning that Pakistan’s additional financing request is not being considered through the RCF which attracts zero interest rate. The financial assistance provided under the RFI is subject to the same financing terms as the Stand-By Arrangement.

Fund chief says emergency financing will allow government to address urgent balance of payments needs and support policies

Ms Georgieva also spoke about the current IMF programme and its outcome. “The authorities have continued their reform efforts to address Pakistan’s economic challenges, but progress is being threatened by the devastating effects of the Covid-19 outbreak and the deterioration in global economic and financial conditions,” she said.

She said Prime Minister Imran Khan and his government had swiftly approved an economic stimulus package aimed at containing the spread of coronavirus and providing support to the affected families and businesses. Similarly, the State Bank of Pakistan has adopted a timely set of measures, including lowering of the policy rate, new refinancing facilities to support the flow of credit, and temporary regulatory relief measures.

“In parallel, the authorities have reaffirmed their commitment to the reform policies included in the current arrangement under the Extended Fund Facility (EFF). These reforms are crucial to boost Pakistan’s growth potential to deliver broad-based benefits for all Pakistanis, especially the most vulnerable segments of the population,” the IMF chief said in the statement.

“The Fund stands ready to continue to support the authorities’ efforts to implement much-needed economic and structural reforms aimed at fostering strong and sustainable growth,” it added.

The IMF has replied to a series of questions posted on its website seeking details of the support facilities for the vulnerable countries.

As per replies, the IMF has two facilities — Rapid Credit Facility created in 2009 and Rapid Financing Instrument set up in 2011 — that provide emergency financial assistance to member countries without the need to have a full-fledged programme in place. These loans can be disbursed very quickly to assist member countries in implementing policies to address emergencies such as coronavirus.

The financing under the RCF is available to low-income countries. It carries a zero interest rate, has a grace period of five-and-a-half years, and a final maturity of 10 years. Members have used this facility 29 times, including last year for Mozambique in the wake of Cyclone Idai and in 2014-15 for Guinea and Liberia to confront the Ebola outbreak.

The financial assistance provided under the RFI is subject to the same financing terms as the Stand-By Arrangement (interest rates are currently about 1½pc), and should be repaid within 3¼ to 5 years. Members have used this facility five times – for instance, in 2016, the IMF provided an RFI emergency loan to Ecuador after one of the strongest earthquakes in decades.

Published in Dawn, March 28th, 2020