WASHINGTON: The International Monetary Fund (IMF) has released the eighth tranche of $506.4 million to Pakistan, bringing total disbursements under an extended loan facility to $4.05 billion.

On Friday, the IMF executive board completed the seventh review of Pakistan’s economic performance under a three-year programme supported by this arrangement.

After the board meeting, IMF Deputy Managing Director and Acting Chair Mitsuhiro Furusawa said that Pakistan was gradually addressing its macroeconomic imbalances, although continued efforts were needed to make economic reforms more sustainable and to boost inclusive growth.

“Pakistan’s progress toward macroeconomic stabilisation is encouraging, thanks to strong performance under the programme and despite significant legal, political and security challenges,” he said.

“Structural reforms are progressing, although more needs to be done, and the risk of legal challenges remains,” he said. “While regulatory reform continues, the power sector remains a key bottleneck for growth and a drain on public finances.”

In September 2013, the executive board approved the three-year extended arrangement under an Extended Fund Facility of $6.18bn or 425 per cent of Pakistan’s quota at the IMF.

Mr Furusawa described Pakistan’s planned fiscal adjustment in the 2015-16 budget as appropriate and welcomed the country’s plans to broaden the tax base, including eliminating tax exemptions and concessions.

But he also reminded Pakistani authorities that “significant scope remains for increasing tax compliance and enforcement”.

Mr Furusawa noted that Pakistan was also implementing plans to reduce costly and inefficient electricity subsidies.

Steps were being taken to contain arrears in the electricity sector, while boosting support for the most vulnerable.

“Legal challenges might still pose risks to the authorities’ efforts, and their commitment to contingency measures is encouraging,” he said.

“Building on recent success in diversifying budgetary financing and reducing the reliance on central bank financing, continued strengthening of public debt management remains a priority,” he added.

The IMF official noted that Pakistan’s foreign exchange reserves had continued to increase and monetary policy had remained appropriate under current macroeconomic conditions.

Published in Dawn, June 28th, 2015

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