$7.6 billion IMF bailout for Pakistan

KARACHI - The International Monetary Fund (IMF) has approved US$7.6 billion loan for Pakistan as a part of stand-by arrangement facility under exceptional provisions for an amount as much as 5 times Pakistan’s annual quota over 23 months or 7 quarters in a bid to stabilise worsening balance of payment position and build-up foreign reserves.
This was unveiled by Shaukat Tarin, Advisor to Prime Minister on Finance, while addressing a Press conference held at SBP premises on Saturday.
“The agreement has been reached with the IMF for getting Stand-By Fund Facility and Letter of Intend (LOI) between IMF and the government will be signed by next week in order to make this deal written document,” Tarin said.
Highlighting the details, he said the country would get worth US$4 billion as an amount of first tranche of the loan inflow on immediate basis during the course of current financial year while the rest of the amount will start releasing by next 2-3 years from the IMF. He said that the interest rate on the facility would vary from 3.51 percent to 4.51 percent with some changes as per market conditions. Pakistan will repay the loan over five years starting from 2011, he added.
“The Fund did not give us any conditions different than those already committed by us and explained above, he said, adding that IMF team down with our team in Dubai and prepared a detailed quarterly plan based on our own home-grown agenda. The only area where they counselled us was to increase the interest rate to curtail the core inflation, though fundamentally correct, was negotiated. Overall they felt that that by an large all our targets are reasonable, realistic and achievable provided we show discipline and determination”.
“We are not planning to invest this capital inflow into stock market but to build up our foreign exchange reserves at appropriate level. I assure you that as a part of fulfilling IMF-Funded package, there will be no any cut down in development and defence expenditures,” he said.
He said keeping in view of downgrading our sovereign ratings and risk of credit default swap triggered by weak balance of payment outlook, there is not suitable time for raising Eurobond and GDRs at international equity market. However, we need to access American and European markets by signing free trade agreements with US.
“There is lot of business and investment opportunities in Pakistan and by implementing Reconstruction Opportunity Zones (ROZs) programme, Pakistan and Afghanistan would allow exporting some textiles, clothing and other goods without paying US duties, he added.
“We contacted the multilateral agencies and all our friends like Saudi Arabia and China along with other multilateral lending agencies such as Friends of Pakistan, Asian Development Bank and Islamic Development Bank and each one of them was appreciative of our program as well as the predicament that we faced in the form of financing gap. They were all willing to give us a helping hand, but would like us to get the endorsement of our program from the IMF. Moreover, the timing was an issue for us as our foreign exchange reserves were depleting at a regular pace” he said.