Pakistan among beneficiaries of IMF-WB initiative
WASHINGTON, April 8: Pakistan is among the major beneficiaries of an International Monetary Fund (IMF) and World Bank initiative to help emerging economies deal with the negative impact of the Covid-19 crisis.
Data released by the two financial institutions show that Pakistan is receiving $1,386 million from the IMF's Rapid Credit Facility (RCF). Pakistan's request for assistance from the RCF was approved on April 16, 2020 and Islamabad started receiving support from this facility soon after the approval.
Pakistan is also getting support from a World Bank programme known as Debt Service Suspension Initiative (DSSI). Between May and December 2020, Pakistan saved $3645.4m with support from this programme, which amounts to 1.3 per cent of its GDP.
Between January and June 2021, Pakistan will save about $2487.8m, which is 0.9pc of its GDP.
Carmen Altenkirch, an emerging market sovereign analyst at Aviva Investors, told the Reuters news agency that Pakistan, Zambia, Pakistan, Argentina and Bahrain were the biggest beneficiaries of these programmes.
Pakistan and Angola would get the most from the DSSI extension.
"Pakistan is a great example of a country that could have defaulted," without the support, she said. But she and other experts warned that this would not solve the underlying problems of those countries that have high debt burdens and rising interest costs.
The Reuters story noted that debt experts, charity groups and investors welcomed news on Wednesday that the world's poorest countries will get new IMF funds and Covid-19 debt relief. But they also cautioned that for some it would still only be a band-aid solution.
A new $650 billion allocation of the IMF's quasi currency known as Special Drawing Rights (SDRs) will provide over $20bn of funding, while an extended repayment holiday on loans from rich G20 nations will temporarily save another $7bn. Those under the most serious stress will receive the biggest benefit. Zambia's share of the handout - SDRs are allocated roughly according to the size of economies - will double its international reserves.
An IMF note on Pakistan showed that under the Covid-19 burden, the country's economic activity worsened notably, with growth preliminarily estimated at minus 0.4pc in FY2020. A gradual recovery is expected in FY2021.
Pakistan also applied to the UN Covax facility to cover 20pc of the adult population (102m doses, $340m), including frontline workers (15m doses, $91m) and adults over 65 years (22m doses, $131m).
By end-January 2021, Covax/Gavi confirmed the allocation of 17.2m doses of AstraZeneca vaccine to Pakistan, 6m doses of which were scheduled to arrive in Pakistan by mid-March, and the rest by June 2021. There are reportedly shipment delays related to the export of the vaccine from India where AstraZeneca is manufactured. Pakistan has so far received 1m Sinopharm doses donated by China.
World Bank President David Malpass welcomed the move but urged G20 nations to show "greater transparency", including disclosing the terms of their financing contracts, and incentivise private creditors to participate in debt relief.
The impact of the moratorium has been relatively limited so far, with just 46 out of 73 eligible countries having asked for and obtained a delay on payments totalling $5.7 billion, according to the latest official figures.
Development NGO Oxfam accused the G20 of "pushing the can down the road".
"If debt cancellation is not part of the solution, the world's poorest countries will continue to struggle to cope with the pandemic and its devastating effects," said Nadia Daar, head of Oxfam's office in Washington, DC.
The G20 also supported the IMF's plan to increase its allocation of special drawing rights (SDR) by $650 billion, said it would "enhance global liquidity and will help the global recovery".
SDRs are international reserve assets that help governments protect their financial reserves against global currency fluctuations, and also help the IMF calculate loans and interest rates.
Also on the agenda of Wednesday's meeting was a US proposal for a global minimum tax rate for corporations, which is supported by the IMF and by major economies including France and Germany.
Italian Economy Minister Daniele Franco said the plan -- aimed at ending tax competition between countries and the use of tax havens by companies -- was "consistent" with ongoing G20 discussions on global tax reform.
The international reform would be comprised of two components: the minimum tax rate and the establishment of a system to modulate corporate taxes based on profits in each country, regardless of where they are headquartered -- which would likely impact tech giants the most.
"We will continue our cooperation for a globally fair, sustainable, and modern international tax system. We remain committed to reaching a global and consensus-based solution... by mid-2021," the G20 statement said.
German Finance Minister Olaf Scholz said agreement was urgently needed, telling reporters: "The summer is the moment when it should happen."
But Ireland, which has become a base for multinationals with its ultra low corporation tax rate of 12.5 per cent, expressed reservations about a global minimum tariff.
Finance Minister Paschal Donohoe said Tuesday his concerns relate to the effect of a universal rate on small and medium economies that tax business at a lower per centage "as part of their overall competitive model". -Dawn