'Home-grown': IMF agrees to a $5.3bn bailout package

Published: July 4, 2013
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Finance Minister Ishaq Dar. PHOTO: AFP

Finance Minister Ishaq Dar. PHOTO: AFP

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.”

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Reader Comments (49)

  • ayesha
    Jul 4, 2013 - 6:19PM

    Confused…..Should I Be Happy or Sad??

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  • Polpot
    Jul 4, 2013 - 6:20PM

    ““We are not begging. We are members of IMF.””
    +++++++++++++++++++++++++++++++
    Very true, as members we are merely borrowing the 19th time……we have earned a loyalty award.

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  • Bunny
    Jul 4, 2013 - 6:21PM

    Beggars are not Chooser… Mr Minsiter… You begged and made us feel low

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  • Naeem
    Jul 4, 2013 - 6:25PM

    When others do it then it is a ‘Kashkol’ when they do it it is not begging…God bless Pakistan.

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  • Jibran
    Jul 4, 2013 - 6:31PM

    Enslaving the next generation. Where are your Saudi friends, who you have been appeasing all along by creating safe havens for their ideology. Where are your Chinese friends who have been dumping their goods in Pakistan.

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  • A
    Jul 4, 2013 - 6:37PM

    Sollution to Pakistans fiscal issues:

    a) Improve tax collection process
    b) Tax on agriculture even if it is 0.5 percent

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  • Poor Indian
    Jul 4, 2013 - 6:37PM

    A proud country borrows to pay back old loans – does not sound right.

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  • Imran
    Jul 4, 2013 - 6:37PM

    Welcome to the next wave of massive inflation. Overall it seems like there is not any difference between the policies of the previous government and the current one. Clearly the party manifesto is only to fool the electorate.

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  • Professor
    Jul 4, 2013 - 6:49PM

    Interesting concluding remarks. “We are not begging. We are members of IMF.” Would IMF lend you money if you are not member? Where are those slogans of breaking the begging bowl? PMLN thinks people are stupid. By the way I am economist by profession and know that there is no home grown programme. IMF would not approve anything that contradicts their funding requirements.

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  • Tahir
    Jul 4, 2013 - 6:50PM

    Is he asking IMF for loan or for his right?

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  • MA
    Jul 4, 2013 - 6:55PM

    yippeee!!!!…borrowing more debt to pay off previous debt whilst no solid tax reforms, immunity for corrupt business practices etc etc. my children and their children….well! they are all screwed up!!

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  • xyz
    Jul 4, 2013 - 6:55PM

    There is nothing wrong in borrowing from the IMF, if one builds on it and gradually graduates out of dependence on any such organization. Many countries, including Turkey and India were under IMF programs at different stages. They used that help, to foster their economy and have never looked back. If the new government manages to do ONLY three things, we should be on the right track: 1) Make the State Bank independent 2)Become fiscally prudent 3)Spread the tax base

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  • unbelievable
    Jul 4, 2013 - 6:59PM

    “The crisis we are facing today is
    because of the fiscal indiscipline
    that was practiced over the last few
    years,”

    This statement as well as something explaining exactly why price hikes and belt tightening are necessary would have been more productive than the chest thumping statements that he has made over the past few weeks. It’s time for the govt to start to educate the public on the basics of what it can and cannot do based on financial limitations. A govt that is bankrupt cannot continue to subsidize fuel, utilities, etc.

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  • Jul 4, 2013 - 7:07PM

    So how much will they be devaluing the rupee? It’s already at 101.30+ in the open market.

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  • Babloo
    Jul 4, 2013 - 7:17PM

    Pakistan’s ability to repay loans entirely depends on genorosity of non-muslim states to give more loans. The day the non-muslim states stop giving new loans , Pakistan will default on loan repayments ( even after generous write-offs and rate reductions ) and will be officially bankrupt.

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  • Ahmed Jamal Pirzada
    Jul 4, 2013 - 7:34PM

    “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.”

    borrowing to pay back earlier borrowings at a relatively higher rate (which is floating rather than fixed)… also if paying back earlier loans is the primary purpose, y not get the existing repayments extended/delayed? But that would call for serious steps towards revenue generation, whereas, simply borrowing gives you enough time to pass the burden to the next govt.

    keeping the fingers crosses and hoping not to be fooled the third time (by the Sharif’s economic bomb)!!

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  • Jul 4, 2013 - 7:36PM

    Only when the Pakistan Peoples Party is running the government, we beg for loans, terrorism is rampant, drone strikes continue, violence in Karachi is unceasing, load shedding continues and all is not well with the state. But when the Pakistan Muslim League-N is in power we have uninterrupted power supply, all is well in the state of Pakistan, drones don’t kill, terrorists are hibernating and when we ask for a loan (this is indeed a classic) “We are not begging. We are members of IMF.” This just shows that the PML-N still thinks that the people are fools. Yes I agree that we cannot fool all the people all the time but we can try and fool all the people for some time.

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  • Kinza
    Jul 4, 2013 - 7:50PM

    Prime minister-designate Nawaz Sharif on Saturday vowed that his party’s government would break the “beggar’s bowl”, stating that Pakistan would have to acquire economic autonomy to reclaim respect among the comity of nations. – See more at: http://www.pakistantoday.com.pk/2013/06/01/news/national/nawaz-vows-to-break-the-beggars-bowl/#sthash.xgYg2XTc.dpuf

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  • Dr Zahid
    Jul 4, 2013 - 7:52PM

    The funny thing about these pakistanis is that they have just got a habit of denial now lol. Taliban are not in pak, they are not supported by pak, Pak is a peace loving country, We are responsible country, We are not begging lol. God knows whether you accept anything in this world as well or not !!! One can just wonder about your hypocrisy.

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  • Polpot
    Jul 4, 2013 - 7:55PM

    ““We are not begging. We are members of IMF.””
    +++++++++++++++++++++++++++++++
    We demand from the IMF, its only the Chinese that we beg.

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  • It Is (still) Economy Stupid
    Jul 4, 2013 - 8:06PM

    IMF loan at 3% is market loan rate nothing unique to Pakistan. This rate is very close to mortgage rate for a house in DC area where IMF is based. IMF said “do more’ and Pakistan complied. Money talks. Everything else Mr Dar says is nothing but balm to sooth the pain.

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  • probono publico
    Jul 4, 2013 - 8:11PM

    we must give an opportunity to ishaq dar, let him excel and prove he is probably the best finance minister pakistan ever had, i am an old ravian as is he, a top graduate of hailey college of commerce in lahore and then a chartered accountant from uk – please keep up your good work ishaq, save the country and live in history as a hero, the former finance minister shoaib also lives in the history but known for depriving Pakistan of steel mill and heavy industrial complexes when Nehru in india was embarking on industrial growth – pakistani nation as great we all are please give him some time – bless you

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  • MUSA
    Jul 4, 2013 - 8:12PM

    good move! PAK has NO MONEY! the question is & the hope & prayer of this nation is that this LOAN is utilized well & in the right places & doesn’t go into the pockets of MINISTERS!

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  • Lt Col Imtiaz Alam (retd)
    Jul 4, 2013 - 8:31PM

    This is known as taking the line of least resistance. The easy way out. The tough decision was to broaden the Tax Base and Tax all citizen’s of Pakistan earning above 400,000/- You see they don’t want to touch their Zamindar Colleagues & Industrialists who enjoy Tax exemptions. Let the rich get richer. Why reduce the Excise Duty on Higher CC cars. Duty should have been reduced only for 800cc cars. Have Direct Taxes. Wealth Tax etc.

    The FBR needs to be rid of corrupt Officers. Every Officers Lifestyle should be reviewed. All their Bank Accounts & Assets declared. Severe punishment to those caught in the act of corruption. There is so much revenue to be collected that we don’t need any Loan from the IMF. Just imagine only 1.8 million pay Taxes. The rest are parasites living on us. This Status Quo is not acceptable.

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  • Polpot
    Jul 4, 2013 - 8:52PM

    @It Is (still) Economy Stupid: “IMF loan at 3% is market loan rate nothing unique to Pakistan.”
    +++++++++++++++++++++++++++++++++++++++++++++++++++++
    The rate of interest reflects the risk ( of default) attached with the country.

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  • asim
    Jul 4, 2013 - 8:59PM

    The PPP government took record loans in the history 25 billion dollars from foreign lenders and same amount for internal banks; Foreign reserves have also been depleted from 18 they came down to 11. In total its around 60 billion dollars that went into the pockets of politicians.

    Now PMLN is on the same track they are becoming richer and masses poor.

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  • PakArmySoldier
    Jul 4, 2013 - 9:16PM

    He will prove to be one of the most incompetent finance ministers in recent memories.

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  • Babloo
    Jul 4, 2013 - 9:20PM

    In Islam are you required to pay back loans from infidel states and that too when they charge interest. Isn’t that forbidden in Islam ? Pakistan can invoke Islam and refuse to pay back all loans and charge the infidel states of un-islamic practices.

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  • Polpot
    Jul 4, 2013 - 9:25PM

    “Franks said he hoped that this announcement of support from IMF would encourage other development partners to extend a helping hand to Pakistan.”
    ++++++++++++++++++++++++++++++++++++++++++++
    This loan from IMF is to repay the earlier loan mis spent by the profligate PPP Govt.
    Just what is the purpose of loans from other developement Partners eg ADB, World Bank etc?:)

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  • Polpot
    Jul 4, 2013 - 9:26PM

    @abdussamad:”It’s already at 101.30+ in the open market.”
    ++++++++++++++++++++++++++++++++++++
    As a cricketing nation we must celebrate the century……..

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  • naeem khan Manhattan,Ks
    Jul 4, 2013 - 9:46PM

    “We are not begging. We are members of IMF.” Not true , Pakistan is a member at the receiving end, so please don’t be saying things which are not true and Pakistani nation is not stupid either. You pushed the sales tax on behalf of IMF which is a regressive tax and it hurts the salaried and the low income people.We would like to see the rest of agreement which you have made with the IMF, broadening the tax base on the backs of who, are you going to levy taxes on large land holdings and corporations.This is your political base and you will not touch them but of course the rest of the country will shoulder the burden like they have doing for the last so many decades. By the way look into the members of National and Provincial Assemblies and find out how many are paying their fair share of taxes or even they pay at all.

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  • kaleem
    Jul 4, 2013 - 9:48PM

    With due respect to pakistanis, more than half of us are tax evaders, but criticize govt to borrow money, without tax collection, govt has not so unlimited resources.

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  • YOUSUF
    Jul 4, 2013 - 10:57PM

    This is jackpot for our ministers.Recommend

  • expaki
    Jul 4, 2013 - 11:26PM

    @MA: “my children and their children….well! they are all screwed up”!

    MA sahib, gather all your children and their children and then Pakistan Sae Zinda Baag :-))
    otherwise these ruling elite will sell us all for free.

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  • Xnain
    Jul 4, 2013 - 11:35PM

    Whether we like it or not, IMF is the cheapest source of financing. IMF lends to its program participants way below the market rates but require structural reforms in return. The yield on Pakistan International Bonds is hovering around 14-15%. This effectively reflects our cost of raising money form international markets. 3% is just too attractive for GoP to let go.

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  • taxman
    Jul 4, 2013 - 11:58PM

    you want to stop begging? Stop whining and pay your taxes folks.

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  • Aasim Mukhtar
    Jul 5, 2013 - 12:10AM

    @probono publico

    The way you have hailed Mr Ishaq dar, for being a Chartered Accountant and etc, I must clarify 1 thing. I do not have any doubt about Mr Dar’s abilities as a Chartered Accountant, but the basic problem is that Finance Ministry is not the job of accountants. A Finance Minister has to be an economist not an accountant, Period.

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  • Irfan
    Jul 5, 2013 - 12:59AM

    Soon 5.3 billions will find a way to swiss accounts.

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  • Skeptic
    Jul 5, 2013 - 1:06AM

    $5.3 Billion? So how will those funds be divided up? Half back to the IMF in back-interest, the rest in the pockets of government cronies. Given the track record of Pakistani governments – civilian and military – projects will be planned, begun and never finished, no matter the source of funding, as the money will be siphoned off long before…

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  • Shanawar Hashmi
    Jul 5, 2013 - 1:13AM

    And that, my friends is how to maintain status quo regardless of election promises, josh e khitabat, etc.

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  • Kolsat
    Jul 5, 2013 - 3:08AM

    There are members and members and not every member borrows from the IMF only the failed ones borrow. Third world countries of which Pakistan is one are the borrowers and western countries whom these third world nations try to blow up are the lenders. So Pakistan cannot say arrogantly they we are members. Pakistan is a beggar nation and should not forget this fact.

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  • Arjun
    Jul 5, 2013 - 3:30AM

    This is as home grown as Pakistan renting Paksat was a satellite launch.

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  • Anjum Arshi
    Jul 5, 2013 - 5:47AM

    @Babloo: What has Islam to do with this discussion? Don’t post a comment if you can’t say something intelligent.

    ET, please post my comment.

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  • Hari Om
    Jul 5, 2013 - 8:40AM

    There is in the end a price attached to boxing above ones own weight and lavishly spending to militarily compete with India. That price is economic crisis and going cap in hand to the IMF.

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  • sgrr
    Jul 5, 2013 - 9:59AM

    Now both parties GoP and IMF are happy, they both achieved objectives, i.e. to obtain loan and to give loan. It was the main purpose, remaining all formalities. It was a nerve game wherein both succeeded. And I am sure that next time IMF will again come and offer loan to repay the old ones. They are just interested in that 3% i.e. Interest.

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  • MOF
    Jul 5, 2013 - 11:42AM

    Who didn’t see this coming from a mile away? He was always going to have to turn to the IMF, anything else from him was wishful thinking.

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  • Zaka
    Jul 5, 2013 - 12:00PM

    It was only Musharraf who got us rid off IMF, for which he is now being punished for. Miss you Musharraf.

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  • Xnain
    Jul 5, 2013 - 2:26PM

    @Zaka:
    Yes buy borrowing from Paris club, citibank and at 10-12% annually. Musharraf Just swapped IMF with expensive consortium lending.

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  • Lt Col Imtiaz Alam
    Jul 5, 2013 - 2:56PM

    @Babloo Mr. Babloo, Why take a loan.

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