Pakistan welcomes IMF $6.7 billion lifeline

Geek

Chief Minister (5k+ posts)
ISLAMABAD: The government on Thursday welcomed a $6.7 billion loan from the International Monetary Fund (IMF) but economists warn it can only be a stop-gap unless Islamabad enacts uncomfortable economic reforms.

The IMF executive board authorised a three year loan, making an initial $540 million available to the authorities.The remaining amount will be evenly paid out over the duration of the programme, subject to the completion of quarterly reviews, the Washington based global lender said.We welcome the timely decision by the IMF board in approving the loan, Rana Asad, a spokesman for the finance ministry, told AFP.

He said Pakistan had got the loan on its own conditions and that the money would be used to pay off previous loans.Basically it is for debt repayment, he told AFP.The aid is an Extended Fund Facility (EFF), which is aimed at helping a country that faces serious balance of payments problems because of structural weakness that require time to address.The repayment period for an EFF loan is between four and a half and 10 years.In its announcement of the loan on Wednesday, the IMF said Pakistans adherence to the programme would likely encourage financial support from other donors.

Despite the challenges it faces, Pakistan is a country with abundant potential, given its geographical location and its rich human and natural resources, the IMF said.The authorities programme is expected to help the economy rebound, forestall a balance of payments crisis and rebuild reserves, reduce the fiscal deficit, and undertake comprehensive structural reforms to boost investment and growth.

The loan is aimed at reducing Pakistans fiscal deficit which neared nine percent of gross domestic product (GDP) last year to a more sustainable level and reform the energy sector to help resolve severe power cuts that have sapped growth potential.The countrys daunting array of problems range from an energy crisis to dwindling foreign exchange reserves and a sinking currency, all the while facing down a Taliban insurgency.

Economic growth has sputtered in recent years.
GDP growth came in at 3.7 percent in 2012 and is forecast to come in at 3.5 percent this year and 3.3 percent in 2014, according to the IMFs latest projections.The request for a loan came just weeks after May elections that marked the countrys first democratic transition of power, putting Prime Minister Nawaz Sharif in office for a third time.The new loan came after months of negotiations.Pakistan abandoned a previous $11.3 billion IMF loan programme in 2011 after refusing to carry out strict financial reforms, and still owes about $4 billion to the Fund.

But Muzammil Aslam, managing director of Emerging Economics Research, which provides investment advice to fund managers, warned it would be difficult for the government to abolish tax subsidies and raise electricity tarries.Nobody takes the Pakistani government seriously in terms of the economic reforms it is supposed to incorporate, Aslam told AFP.The pre-conditions are very tough for the government to fulfil Non-performance could cease the release of the loan and thus could raise bigger challenges for the government.

Mohammad Sohail, chief executive officer of Topline Securities, a Karachi-based research and investment house, said the IMF would keep up the pressure on the government.A quarterly review of the performance would compel the government to live with fiscal discipline otherwise it would face the music, he said.The political situation in Pakistan is also expected to pose a challenge for the IMF.There isnt any doubt that its going to be an extremely difficult programme for the IMF to oversee, Jacob Kirkegaard of the Peterson Institute for International Economics told AFP.

If Pakistan was not a nuclear-armed country, the dominant countries at the IMF board would probably be less interested in trying everything possible to stabilise the situation there.

http://tribune.com.pk/story/600188/pakistan-welcomes-imf-6-7-billion-lifeline/
 

shassan655

Senator (1k+ posts)
I have always wondered about our external debt. This scares the hell of out of me, when I look at the table below. Allah knows how much we will be incurring during 2013 all together.

[h=2]Debt - external (Billion US$)[/h]
Country2000200120022003200420052006200720082009201020112012
Pakistan323831.532.333.5433.9738.842.3838.844.1553.6257.2161.83
Definition of Debt - external: This entry gives the total public and private debt owed to nonresidents repayable in foreign currency, goods, or services. These figures are calculated on an exchange rate basis, i.e., not in purchasing power parity (PPP) terms.
 

miafridi

Prime Minister (20k+ posts)
Pakistan ki misaal os ghareeb kisaan ki si hogai hai jo beech oganay k liye sood per paisay leta hai aur phr jab fasal pak jati hai toh oski sari amdani sood may chali jaati hai aur osay phr say fasal ogaanay k liye sood per paisay lenay ki zarurat hoti hai.