Prelims: Current events of national and international importance| Economic and Social Development
Why in news?
Recently the Executive Board of the International Monetary Fund (IMF) decided to allow for “an immediate disbursement” of $1 billion (Rs 8,500 crore) to Pakistan as part of IMF’s Extended Fund Facility (EFF) to Pakistan.
- Extended Fund Facility – It is a financial assistance program provided by the International Monetary Fund that is available to all IMF member countries.
- Objective - It is designed specifically for countries facing "serious medium-term balance of payments problems".
- It means that the countries that are unable to pay for imported goods and services due to structural economic weaknesses.
- Loan structure – The disbursement duration of the EFF is usually 3 years and it can be extended up to 4 years in special cases needing deeper structural reforms.
- IMF typically allows for repayment over a period of 4.5 to 10 years.
- It provides assistance only in the form of loans, not grants or aid.
- It is called "extended" because recipients need more time to implement structural reforms.
- Accountability framework – IMF regularly reviews the progress of the country throughout the disbursement period.
- The progress evaluations determine eligibility for subsequent disbursements.
- It also includes formal review processes to monitor progress on economic stabilization.
- It focuses on fundamental structural weaknesses such as
- Inadequate physical infrastructure
- Insufficiently educated workforce
- Excessive government borrowing beyond repayment capacity
- Underdeveloped financial and banking systems
- Pakistan's EFF– EFF is extended to Pakistan as the country has been on the brink of bankruptcy with its total GDP has been stagnant over the past decade.
- It is currently under a 37-month EFF approved on September 2024 with total approved disbursement of $7 billion.
- Latest tranche - $1 billion on May 9, 2025
Reference
The Indian Express| IMF loan to Pakistan
