ISLAMABAD: Federal Finance Minister Ishaq Dar and International Monetary Fund (IMF) Pakistan Mission Chief Jeffrey Franks on Thursday struck a loan agreement worth $5.3 billion in a bid to rebuild foreign exchange reserves, an energy crisis and a sliding currency in Pakistan.
The nuclear-armed state had long been expected to seek a fresh bailout package from the IMF after abandoning a $11.3 billion loan program in 2011 after refusing to carry out strict financial reforms.
In a press conference, Dar applauded the role of the IMF official in negotiating the deal with Pakistan and said, “We are entering into a fresh program with IMF to not only retire past liabilities but also to bring about structural reforms in the country.”
“We have successfully agreed over a program that is home-grown and consistent with the new government’s policies,” Dar asserted.
Detailing the loan agreement, Franks said that this is a program which is being supported as part of IMF Extended Fund Arrangement.
Franks said the loan was subject to further approval within the IMF and would then go to the executive board in early September.
“Worth $5.3 billion, the program will carry a floating interest rate of 3% and would be payable over a longer period than conventional arrangements to facilitate Pakistan in repaying the loan,” Franks explained.
Confirming Dar’s earlier assertion that the loan agreement was “home-grown”, Franks said that it is a Pakistan designed and built program.
“The government has developed plans to improve tax collections through improved administration and through a mechanism to eliminate loopholes in the coming years,” Franks said, adding that the difficult decisions have already been made.
“The agreement has been reached with Pakistan’s business climate in mind and will serve to bring about the much needed restructuring in Pakistan’s economy,” he maintained.
Franks said the aim was to bring down the fiscal deficit, which neared nine percent last year, to a more sustainable level and reform the energy sector to help resolve severe power cuts that have sapped growth potential.
He added an agreement with the State Bank of Pakistan was also designed to help rebuild foreign exchange reserves and keep inflation at acceptable levels.
Franks said he hoped that this announcement of support from IMF would encourage other development partners to extend a helping hand to Pakistan.
“The crisis we are facing today is because of the fiscal indiscipline that was practiced over the last few years,” Dar added.
Bringing the press conference to a close, the finance minister said “We are not begging. We are members of IMF.”