ISLAMABAD, Nov 13: The Prime Minister’s Adviser on Finance, Mr Shaukat Tarin, told the Senate on Thursday that Pakistan was likely to get $5-6 billion from the World Bank and other international financial institutions by December.

Concluding a debate on the economic situation, Tarin said all the conditions set by the International Monetary Fund (IMF) were already part of the budget for the current fiscal year — reducing the fiscal and current account deficit and inflation and increasing the tax-to-GDP ratio.

He said the aid from international financial institutions would build the confidence of the ‘Friends of Pakistan’ and “help reverse flight of capital”.

He said China had promised to give $500 million to Pakistan, which would enhance the confidence of the members of the ‘Friends of Pakistan’ forum.

Rejecting a perception that the IMF package would have a negative impact on economy, he said: “It has agreed to provide the facility on our own terms and conditions.” He said a condition “we discussed with IMF was zero borrowing from the State Bank. We also believe there should be no net borrowing from the SBP”.

Because of this policy, the fiscal deficit had dropped from an estimated Rs175 billion to Rs138 billion, he said.

Mr Tarin said: “Rs160 billion from the outstanding debts has come back to our table and the government has done no additional borrowing.”

He said the government was committed to its word of ‘zero borrowing’ from the central bank. He said the government would post the IMF conditionalities on its website.

The adviser said the ‘Friends of Pakistan’ had also demanded endorsement of the government’s plan by the IMF for giving loans.

He said the government had set a target of reducing fiscal deficit from the current 7.4 per cent to 4.3 per cent and current account deficit from 8.4 per cent to 6.7 per cent and increasing the tax-to-GDP ratio from 8-9 per cent to 15 per cent in five to seven years.

Mr Tarin said the economic situation had been worsening since 2004. The rate of dollar was kept stable artificially and the country was on the brink of bankruptcy in June last year, while the previous government was declaring the country an ‘Asian Tiger’.

He said no country could make sustainable growth without controlling inflation.

After receiving the loan, the government would work on its nine-point agenda, including welfare of the poor, uplift of agriculture, human resource development, energy generation, capital reforms and making the country self-reliant, he said.

He stressed the need for seeking long-term solutions to avert such crises in future. If a country defaults, it takes years to regain its past position.

He said the interest rate had been increased by two per cent by the board of the SBP using its discretionary powers.

Meanwhile, the SBP said it had received $200 million from the Islamic Development Bank.—APP/Reuters

Anwar Iqbal adds from Washington: IMF external affairs senior adviser David Hawley said at a press briefing that talks between the fund and Pakistan on a possible loan package were ‘well advanced’.“There are still a few issues on which work is continuing in order to reach understanding,” he said.

Mr Hawley said the two parties were discussing what economic policies Pakistan needed to implement to qualify for an IMF loan package. The IMF wanted the government to commit to addressing macroeconomic imbalances in order to restore investor confidence, as well as targeted social programmes to protect the poor, he said.