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ISLAMABAD: The International Monetary Fund (IMF) has "in principle" agreed to extend a credit of $7.6 billion to Pakistan to stabilise its ailing economy and help it avoid defaulting on foreign debt repayments, the government said today.
"Pakistan would get $4.6 billion this month while the remaining $3 billion would be disbursed next year," Pakistan's Advisor on Finance Shaukat Tarin told reporters.
Tarin said the credit facility will be for two years under a standby arrangement.
"The facility has been obtained to strengthen the country's foreign exchange reservoirs and it will not be utilised to bailout the stock market".
He said the repayment of the credit will start in 2011 and will be completed in five years time. The rate of interest would be between 3.51 to 4.51%.
Tarin said the IMF loans have no conditionalities for micro-management of the economy and the conditions agreed with the Fund are already there in the current year's budget.
He said the rating companies have reduced the economic rating of Pakistan as it is passing through economic challenges.
The government supports the steps taken by the State Bank to tighten the monetary policy of the country, he added.
The Advisor said the rupee has been depreciated by 21.8% and the foreign exchange reserves have been reduced to half during the last one year.
The increase in the inflation rate has affected the poor segments of the society, he said adding, increase in the discount rate will help to check the inflation. He said the government has decided not to borrow from the State Bank. Tarin said the non-developmental expenditures have to be reduced to overcome the financial deficit.
Islamabad is also reportedly discussing a $10 billion to $15 billion support package with other bodies, including the Asian Development Bank, and bilateral donors like Saudi Arabia. It is also seeking funds from China.
Opposition parties have strongly opposed the move by the PPP-led coalition to approach IMF and complained that thParliament has not been informed about the decision and IMF conditionalities.
Pakistan has already fulfilled some pre-conditions to seek the loan, including end of subsidies oil and oil products, economic analysts noted. The IMF will take quarterly review of Pakistan's economy after the loan is extended, they said.
Officials defend the decision to go to IMF as the so-called 'Friends of Pakistan' group did not assure any cash package to the insurgency-hit country.
US Assistant Secretary of State for South Asia Richard Boucher said last month in Islamabad that the Friends of Pakistan will not give any cash to the country.
The country's rising inflation, now estimated at around 25%, and rapid depletion in its foreign currency reserves forced Pakistan to seek emergency cash advance from friendly countries and international financial institutions.
Local media reported that the United States has played a key role in persuading international financial institutions to help Pakistan but it is also urging Islamabad to undertake serious economic reforms. |
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