Rupee depreciation not EFF requirement: IMF

ISLAMABAD: Depreciation of Pak rupee is not a requirement of $6.64 billion Extended Fund Facility (EFF) agreement, Gerry Rice, Director Communications of the International Monetary Fund (IMF), stated in response to a query emailed by Business Recorder.

Rice added: “the IMF’s Executive Board approved a three-year, $6.64 billion Extended Fund Facility arrangement with Pakistan. We are aware that there has been some depreciation of the rupee in recent days. This is not a requirement of the IMF agreement; quite the contrary. Policies under the agreement will help reverse the economic imbalances that are causing exchange rate pressure.”.

Former Finance Minister Salman Shah told Business Recorder that to shore up reserves and not merely to borrow to pay off past loans the government should have sought $9.6 to $10.6 billion loan from the IMF. Failure to procure a higher loan amount led to the current dangerous situation with a fast eroding rupee value as the government struggles to meet the Net International Reserves (NIR) requirement under the EFF programme which has created uncertainty and brought the local currency under pressure.

Finance Minister Ishaq Dar had announced at the joint press conference with head of IMF mission at the conclusion of Post Programme Monitoring (PPM) mission on July 5, that Pakistan had requested the IMF management to increase the present level of access of 348% of the quota (5.3 billion) to 500% of quota ($7.3 billion). This was confirmed by a senior official of Finance Ministry who told Business Recorder that Pakistan had requested an increase in quota by 500 per cent ($7.3 billion) but the staff level mission initially agreed to 348 per cent ($5.3 billion) which was subsequently increased to 415 per cent ($6.64 billion).

So it is not true to state that the country requested less than what was required, he added.

Another official stated that after the approval of the IMF programme there is commitment by other bilaterals and multilaterals to extend budgetary support and the government is expecting sufficient inflows to meet the NIR requirement under the EFF. He said that some schemes are under consideration are aimed at increasing remittances inflows, which are expected to show some growth in the current fiscal year.

Additionally, he said investment agreements reached with China by the present government are expected to materialize in the current fiscal year which would increase the Foreign Direct Investment (FDI) and inflows in capital accounts.