ISLAMABAD, Jan 19: The International Monetary Fund (IMF) will disburse second tranche of $109 million, out of $1.3 billion poverty reduction and growth facility (PRGF), in March due to improvement in the economy.

Official sources told Dawn here on Saturday that the Fund officials appreciated the current state of the economy, specially increase in the foreign exchange reserves to about $5 billion, and said there should not be any problem to offer next tranche of $109 million to Pakistan by early March.

The IMF review mission will be here in the first week of February to discuss various important issues, including the restructuring of the CBR. “But we have been given to understand that the Fund will approve and disburse 109 million dollar’s next instalment by March this year due to improvement in the economy despite some serious shocks received in the wake of Sept 11 events,” said a senior official of the ministry of finance.

He said IMF was very much appreciative of the fact that Pakistan made heavy repayments in the month of December but still its reserves have considerably improved. “These reserves have improved by one billion dollars within few weeks which has been acknowledged by the Fund officials,” he added.

The Fund management has been informed that the State Bank of Pakistan has prepared a draft comprehensive strategy for the modernization and strengthening of the financial sector, which will be a key component of Pakistan’s poverty reduction strategy.

The strategy aims at developing a market-oriented, mainly private-owned financial sector, performing efficient financial intermediation. The main policy objectives include: promoting sound, efficient and competitive financial institutions, widening the availability of financial instruments and services, enhancing transparency and cost-effectiveness of the financial market and strengthening the capacity of financial regulatory agencies while enforcing their autonomy.

The State Bank will particularly explore ways on how to ensure effective supervision in areas such as anti-money laundering. On the transition to an Islamic banking system, the government will allow and encourage the development of Islamic banking in parallel with traditional practices to allow customers maximum choice.

To avoid subsidisation of the export finance scheme, the re-finance rate charged by the SBP to commercial banks will be set monthly at a level to the average six month treasury bill auction rate of the preceding month, with banks free to set the rate of customers.