Pakistan to Seek Additional $4.5 Billion IMF Loan
Pakistan will seek an additional $4.5 billion loan from the International Monetary Fund to help revive an economy hurt by fighting the global war against terrorism.
“We will ask the board of directors for the amount as the war on terror has caused serious economic problems,” Shaukat Tarin, the finance adviser to the prime minister, said yesterday in a telephone interview from Islamabad. The additional funds would boost the country’s total borrowing from the IMF to more than $12 billion, he said.
South Asia’s second-biggest economy got a $7.6 billion loan from the IMF in November, to be disbursed over 23 months, as it sought to avoid defaulting on its debt. The country got $3.1 billion as the first installment by Nov. 27, boosting foreign- currency reserves held by the central bank to $6.9 billion in February from $3.45 billion four months ago.
President Asif Ali Zardari is facing pressure from the U.S. to step up the fight against Taliban and al-Qaeda insurgents along the border with Afghanistan. The country has received about $10 billion in aid from the U.S. since 2001, when former president Pervez Musharraf became an ally in the global campaign against terrorism. Musharraf quit in August.
Pakistani and IMF officials began two weeks of talks in Dubai, United Arab Emirates yesterday as part of a review for disbursing the second installment of the November loan, Tarin said, without saying how much the country is spending on fighting militants.
For the additional loan, Pakistan doesn’t want to negotiate new conditions with the IMF at the end of 23 months, Tarin said paperless payday loans. “We have met all major conditions” set by the IMF, he said.
Benchmark Rate
State Bank of Pakistan, the nation’s central bank, last month kept its benchmark interest rate unchanged at 15 percent as inflation in January slowed to an eight-month low of 20.52 percent. In November, the central bank had raised the key rate by two percentage points, the most in more than a decade, as part of conditions for the IMF loan.
Higher borrowing costs have dented growth in the economy, which is predicted by the government to expand at the slowest pace in seven years after growing an average 6.8 percent in the past five years. Suicide attacks by militants in the past two years in reaction to the military operation in tribal regions has deterred foreign investment and hurt local companies including National Bank of Pakistan.
The government is targeting a budget deficit of 4.2 percent of gross domestic product this fiscal year ending June 30, from a decade-high of 7.4 percent last year. Pakistan’s rupee plunged 22 percent in 2008.
Pakistan completed its last IMF program in 2004 with a credit rating from Standard & Poor’s of B+, four levels below investment grade. S&P in December raised Pakistan’s rating one level to CCC+, or seven levels below investment grade, after the IMF loan.
Filed under: finance by Wolf