IMF 'carefully watching' Afghanistan, too soon to predict spillover to Pakistan

Published August 13, 2021
General view of the Pakistan's flag in the background as seen from the Friendship Gate crossing point in the Pakistan-Afghanistan border town of Chaman, Pakistan. — Reuters
General view of the Pakistan's flag in the background as seen from the Friendship Gate crossing point in the Pakistan-Afghanistan border town of Chaman, Pakistan. — Reuters

The International Monetary Fund (IMF) is "carefully watching" the Taliban's advance in Afghanistan, a spokesperson said on Friday, but added it was too early to predict the economic spillover in neighbouring IMF programme countries like Pakistan.

Taliban insurgents tightened their grip on Afghanistan on Friday, wresting control of its second and third biggest cities.

"The IMF is carefully watching the fast-moving situation on the ground in Afghanistan," an IMF spokesperson told Reuters. "It is premature to speculate on the outcome and potential economic spillovers to Pakistan".

"We stand ready to continue supporting Pakistan achieve the objectives of debt sustainability and strong and sustainable growth," the IMF spokesperson said.

"No date is currently set for concluding these (review) talks, as we are focused on the reforms and policy steps needed to achieve the programme objectives," which include reducing debt and reforming the country's energy sector, the spokesperson added.

Pakistan has a $6 billion IMF programme that began in 2019. The government and the Fund's staff have been in talks in recent months to try to finalise the programme's latest progress review but are yet to reach agreement.

Pakistan and the IMF have been working to implement IMF-supported economic reforms, in particular tax collection, aimed at stabilising the economy and shoring up a yawning fiscal deficit.

In March this year, the IMF had released the third tranche of $500 million for the country after disbursing $1.45bn in previous two tranches, bringing the total disbursements to $2bn.

In June, the IMF had said it was holding open, constructive discussions with Pakistan, insisting further talks were needed about the country's fiscal spending plans, structural reforms, particularly in the tax and energy sectors, and social spending.

“We stand ready to continue to support Pakistan,” IMF spokesman Gerry Rice had said. “As the recovery gains strength, it will be important to accelerate the implementation of policies and reforms needed to address some of the long-standing challenges facing the Pakistani economy.”

The same month, Finance Minister Shaukat Tarin had said it was not possible for Pakistan to get out of the IMF programme at a time when the economy is reviving.

Apart from the 39-month loan, the minister had on Thursday said that Pakistan will receive $2.77b ‘unconditional’ funds from the IMF on Aug 23.

The minister said the $2.77b were part of the $650b general allocation the Washington-based lending agency made to all its members to boost international liquidity challenged by the global health pandemic.

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