WASHINGTON: The IMF approved the disbursement of US$1.386 billion to Pakistan under the Rapid Financing Instrument to address the economic impact of the coronavirus shock.
“While uncertainty remains high, the near-term economic impact of COVID-19 is expected to be significant, giving rise to large fiscal and external financing needs,” the international lender said in a statement.
Pakistan has recorded just over 100 deaths but experts have voiced fear that the country of 215 million people could see a rapid and devastating increase due to its shortage of medical infrastructure and crowded cities.
Worried about hurting an already weak economy, Prime Minister Imran Khan has resisted a sweeping, nationwide lockdown but provinces have shuttered schools and companies.
“The domestic containment measures, coupled with the global downturn, are severely affecting growth and straining external financing,” said Geoffrey Okamoto, the IMF’s first deputy managing director.
“This has created an urgent balance of payments need,” he said.
The IMF official voiced support for actions taken in Pakistan including a boost in spending on public health and the social safety net to brace for a worsening crisis.
“In response to the crisis, the government of Pakistan has taken swift action to halt the community spread of the virus and introduced an economic stimulus package aimed at accommodating the spending needed to tackle the health emergency and supporting economic activity. Crucially, the authorities are increasing public health spending and strengthening social safety net programs to provide immediate relief to the most vulnerable,” Okamoto said.
He also credited the central State Bank of Pakistan with measures that have included lowering its benchmark rate and supporting liquidity.
The IMF said it was providing the $1.386 billion under a so-called rapid financing instrument, which addresses emergencies and does not subject a country to a full-fledged reform program that undergoes review.
Pakistan is a longtime recipient of help from the IMF and is already under a three-year, $6 billion program that was approved last year.
Okamoto said Pakistan needed to recommit to its goals under the package once the crisis abates, including restoring its public finances and governance.