The International Monetary Fund (IMF) said on Saturday that it would discuss with officials from Pakistan the steps to be taken by the fund to ease the country’s pain following the worst floods in its history.
The meeting next week comes amid reports that Pakistan would ask the IMF to ease the terms of a $10 billion loan it has received since November 2008. The floods have affected 20 million people amid growing fears that losses could snowball to $43 billion.
“The scale of the tragedy means that the country’s budget and macroeconomic prospects, which are being supported by an IMF-financed programme, will also need to be reviewed,” said Masood Ahmed, director of the IMF’s Middle East and Central Asia Department. “In this context, we look forward to meeting with Pakistani government officials in Washington next week to evaluate the macroeconomic impact of the floods, assess the measures they are taking to address this impact and discuss ways in which the IMF can assist Pakistan at this difficult juncture,” he said.
IMF Managing Director Dominique Strauss-Kahn wrote to President Asif Ali Zardari at the outset of the disaster that “the IMF stands with Pakistan at this difficult time and will do its part to help the country.” Finance Minister Abdul Hafeez Shaikh will ask the IMF to restructure the current loan or consider new financing, the Financial Times reported on Friday, quoting government officials.
“Either the fund steps forward and allows plenty of relaxations on the current programme or we make a fresh start and discuss a new programme with performance criteria that are tailored to our new economic realities,” one official told the paper. “The present programme is not looking sustainable.”
Even before the floods, there had been speculation that the government might seek a new loan agreement with the IMF. But in light of the natural disaster, Islamabad now fears it will not be able to meet key IMF targets on inflation and budget deficit, the Financial Times said.
The IMF in 2008 approved a rescue package for Pakistan as the country struggled to cope with security problems, 30-year-high inflation and fast-depleting reserves. So far, the country has received about $7.3 billion from the IMF loan.
Published in The Express Tribune, August 22nd, 2010.
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