IMF agrees to allow Pakistan to seek $6.6bn: Officials

Published: August 13, 2013
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"The IMF has raised its offer following further consultations in the US and now agreed to $6.6 billion," said a top finance ministry official. ILLUSTRATION: JAMAL KHURSHID

"The IMF has raised its offer following further consultations in the US and now agreed to $6.6 billion," said a top finance ministry official. ILLUSTRATION: JAMAL KHURSHID

ISLAMABAD: The International Monetary Fund has agreed that Pakistan can seek a loan package worth $6.6 billion, two top finance ministry officials said on Monday, a boost for Prime Minister Nawaz Sharif as he seeks to fix the moribund economy.

The Fund had settled on an initial package of $5.3 billion after an IMF delegation held weeks of talks in Pakistan in July. Pakistan had requested $7.2 billion.

“The IMF has raised its offer following further consultations in the US and now agreed to $6.6 billion. The official announcement will come very soon,” said a top finance ministry official, requesting anonymity because he was not yet authorised to speak on the record.

The IMF’s executive board will formally approve the package for Pakistan sometime in early September, as long as Pakistan has made some fiscal reforms, the IMF said on its website.

The government has already slashed costly subsidies on electricity and sent out notices to 10,000 delinquent taxpayers last month as part of the conditions set by the IMF.

Pakistan has one of the lowest tax-to-GDP ratios in the world and the IMF wants it to do more to tackle rampant tax evasion by the wealthy elite.

The Saudi Islamic Development Bank Group Ltd has also pledged a $997 million credit line and a $200 million trade facility for Pakistan to buy petroleum products, said Shafqat Jalil, the Finance Ministry’s spokesperson.

“We will end up with a shortfall of $600-700 million, which we will bridge through other donors like the ADB (Asian Development Bank),” Jalil said.

The ADB, one of Pakistan’s major lenders, estimates that Pakistan needs $6 billion to $9 billion to meet its obligations, including about $5 billion in outstanding debt on an earlier $11 billion IMF loan package that was suspended in 2011.

The new loan will come just in time. The central bank has only about $5 billion left in foreign currency reserves, enough to cover less than five weeks of imports.

Pakistan averted a balance of payments crisis in 2008 by securing the $11 billion loan, but this was suspended two years ago after economic and reform targets were missed.

Chronic gas and electricity shortages, violent crime and a Taliban insurgency have all hampered growth and contributed to a dramatic drop in foreign investment. The $230 billion economy grew 3.6 per cent in the last fiscal year, below a target of 4.3 per cent.

The new government has already made some steps towards reforms and has set an ambitious deficit target of 6.3 per cent growth for 2013/14 – although some analysts say that might be hard to meet.

It also plans a new energy policy to tackle power cuts, which frequently last 12 hours a day and have devastated the economy and fuelled unrest.

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Reader Comments (15)

  • Mohammad Ali Siddiqui
    Aug 13, 2013 - 1:29AM

    Can any one tell me how Pakistan can get rid of IMF?

    Recommend

  • ahmedmasood
    Aug 13, 2013 - 1:39AM

    why don’t we get taxes from our own people?
    why don’t we ask NR Pakistani’s to help?
    why don’t we cut subsidies for some time ?

    _

    This is just BHIKHARIPANA !

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  • Dr Dang
    Aug 13, 2013 - 2:06AM

    How much is enough ?

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  • Ussama
    Aug 13, 2013 - 2:51AM

    This is just sad.

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  • optimist
    Aug 13, 2013 - 3:24AM

    Thank you IMF but who is gonna pay this loan?
    .
    I don’t mind if the loan is for solar energy or for some technological adventure or a Space programme as they are helpful in economic growth.
    .
    In reality these loans are just another burden and desperate attempt to repay old loans.

    Recommend

  • Farhan
    Aug 13, 2013 - 3:45AM

    Please! Spare us the pain and keep your $6.6 billion.

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  • zulfiqar
    Aug 13, 2013 - 7:31AM

    This is a loan NOT a grant.
    Collect proper taxes and we will have enough money

    Recommend

  • Khan
    Aug 13, 2013 - 7:43AM

    Why can’t we pay our utility bills

    Why do we steal electric and gas and fix our meters?

    All of the above causes the country losses in millions.

    Recommend

  • lalagee
    Aug 13, 2013 - 9:37AM

    No dont give them..they will use them in building terrorist camps against India

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  • Nabeel
    Aug 13, 2013 - 9:46AM

    Rather than begging from IMF, they should improve our economy & work on tax system, because ultimately this is what our nation have to pay for it..

    Recommend

  • Ashkenazi
    Aug 13, 2013 - 11:24AM

    @Mohammad Ali Siddiqui:
    Debt moratorium, trade, sovereign financing, pegging payments to forex reserve inflow, ditching paper fiat currencies, bring back looted wealth.

    Lot of options, not enough backbone nor approval from US.

    Recommend

  • polpot
    Aug 13, 2013 - 12:58PM

    “IMF agrees to allow Pakistan to seek $6.6bn: Officials”
    +++++++++++++++++++++++++++++++
    Best Eid news ever.
    Let the future generations pay.

    Recommend

  • Hedgefunder
    Aug 13, 2013 - 3:20PM

    Yes ! Continue digging deeper hole, as its obvious that this country has simply not learned a proper format of taxation, not is likely to, as the politician simply can not afford the wraith of the elite !

    Recommend

  • paki education
    Aug 13, 2013 - 6:35PM

    @Farhan:
    looks like its IMF’s interest is to give billion aid to pakistan

    Recommend

  • rome
    Aug 14, 2013 - 11:00PM

    this loan will only benefit the rich. the poor are going to pay for the loan. the real theft of electricity, gas, oil, bribery etc is the rich people. why blame the poor for not paying. Get the money from the rich peoples accounts wether its in Pakistan or outside Pakistan. But this will not happent offcourse.

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