While forex reserves run low, government undecided on fresh IMF loan

Published: December 13, 2012
The country had been on the verge of defaulting on international payments. However, IMF prematurely terminated the programme in 2010, with $3.4 billion still undisbursed. ILLUSTRATION: JAMAL KHURSHID

The country had been on the verge of defaulting on international payments. However, IMF prematurely terminated the programme in 2010, with $3.4 billion still undisbursed. ILLUSTRATION: JAMAL KHURSHID


The government finds itself in a fix as it debates signing on for a new loan programme with the International Monetary Fund (IMF). The country’s economic managers want a deal, while the political leadership is sensitive to the implications of a potentially unpopular decision ahead of the general elections.

Speculations of renewed negotiations for a loan from the IMF were fuelled after the recent meeting of Pakistani authorities with IMF officials in Washington, on the sidelines of a Pakistan-US strategic dialogue. A member of the visiting team told The Express Tribune that the US has assured Pakistan that it will support any move for a new loan programme in the IMF board.

Economic managers, led by Finance Minister Dr Abdul Hafeez Shaikh, speak in favour of the new programme: they say it will ensure predictability and stability during the time the government will transition as part of the election process.

Speculations of renewed

While insisting that the economy is “still manageable” despite difficult conditions, the finance minister has said that the question is how much more exposure the country will take before deciding to go for the loan. He said that it was a matter of deciding while the economy was still on solid ground, or when it was right at the verge of another default.

The United States and international financial institutions are also of the opinion that indecisiveness and uncertainty regarding the economic policy could lead to a further deterioration in economic conditions, particularly on the external front. They concur with the view that an IMF-approved programme will ensure continuity of policies during the transitionary period.

However, discussions with members of the government’s economic team reveal divisions within its ranks, which may delay an official decision on whether or not to go the country will opt for the loan.

Other government officials said the political blowback from entering a fresh loan programme is restraining the government from taking a decision. The IMF programme is not expected to be popular among the masses, and will hurt the vote bank of the ruling Pakistan Peoples Party.


Minister of State for Finance Salim Mandviwalla said that signing on for a new programme will be a political decision, and that no decision has been taken in this regard at any level so far. He also dismissed media reports claiming that an IMF team will visit Pakistan, saying that no such thing will materialise until the government decides to sign a fresh deal.

Mandviwalla also hinted that the incumbent government will not take any decision regarding fresh loans without the consent of other political parties.

Meanwhile, foreign exchange reserves held by the State Bank of Pakistan have already depleted to $8.7 billion, sufficient only for ten weeks’ worth of the country’s import bill. The IMF has warned that the reserves are “below adequate levels”. The rupee has also depreciated to an historical low against the US dollar, and the fiscal deficit is expected to widen beyond official estimates of Rs1.2 trillion.

Pakistan entered into a three-year arrangement with the IMF in 2008 for an $11.3 billion loan. The country had been on the verge of defaulting on international payments. However, the IMF prematurely terminated the programme in 2010, with $3.4 billion still undisbursed, after the government could not demonstrate that it had implemented the energy and taxation reforms promised in return for the money.

The finance ministry says the country has an ongoing dialogue with the IMF, and the recent meetings were aimed at reviewing the economic health of the country. However, there is a wide difference between official and IMF projections for the economy, which indicates that both parties may not be on the same page despite continuing contact.

Published in The Express Tribune, December 14th, 2012.

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Reader Comments (7)

  • PTI Mardan
    Dec 14, 2012 - 12:26AM

    This govt will try its best to make things as bad as possible for the next govt.Up till now thay have survived on printing billions of rupees per day resulting the US$ to touch 97 rupees.Imran khan is right in saying that if it were not for the ex pat Pakistanis who send their earnings back home,Pakistan would have been bankrupted long ago.Yet their ministers hold long press conferences ‘debunking’ claims fo corruption by Transparency international.

    Enough to open our eyes.Please vote for PTI the next time.If someone can build and run world class hospitals and university while not in power,imagine what they can achieve with govt’s authority.Recommend

  • hasan
    Dec 14, 2012 - 6:04AM

    Begging time !! So we can expect more trips to Washington, Beijing and Saudia very soon on taxpayer money..


  • Dec 14, 2012 - 11:26AM

    Pakistan is pushing ahead with producing nukes and missiles. If Pakistan can produce such hi tech stuff, it surely doesn’t need outside help.

    Countries like India and US give IMF money to help economies like Bangladesh and Greece who face fiscal pressures, not wanna be powers like North Korea and Pakistan, who think they are mighty powers and produce dangerous weapons, keeping its populace poor and destitute.


  • Haseeb Khan
    Dec 14, 2012 - 7:13PM

    Government wants loan urgently but IMF is not in rush to fall into another trap.They will impose pre-actions and wait till new elected government is in place. Look at the level of tax compliance in Pakistan especially the Senators/MNAs


  • jay verma
    Dec 15, 2012 - 12:29AM

    Who is going to beg this time ? And where ? China ? Saudia ?


  • meekal a ahmed
    Dec 15, 2012 - 10:20PM

    People can say what they want but the hard fact is that as we draw-down on our reserves there will be a point where markets will panic, there will be massive capital flight, the stock market will tank and the rupee will go into free-fall (as in 2008) and no one, no politician and no FM with their lofty words will be able to do a damn thing about it.

    And the only one who will lend money to Pakistan in the midst of such a crisis will be the lender-of-last-resort: The IMF.

    Not the Saudi’s and not even the Chinese.

    Actually, they will tell you to go to the IMF!


  • Dec 24, 2012 - 10:37PM

    No more loan please. We are already suffring.


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