November 28, 2008	Friday	Ziqa'ad 29, 1429

KARACHI, Nov 27: The much-awaited first tranche from the $7.6 billion IMF loan has reached Pakistan, according to State Bank’s spokesman.

“We have received $3.1 billion as the first installment of IMF loan,” said Syed Wasim.

The total loan of $7.6 billon will be delivered in 23 months which the IMF said would help Pakistan meet the gap in its current account balance for next two years.

The IMF loan has been severely criticized by economists and trade and industrial sectors which see adverse consequences of the conditions attached to the loan.

Before approval of the loan Pakistan had to meet certain conditions like increasing the interest rate and withdraw subsidies, especially on oil, gas and electricity.

Now the national economy is in the grip of the very high interest rate of 15 per cent which may be increased further in January.

While the government has welcomed the IMF loan, the manufacturing sector and businessmen find it extremely difficult to survive under high interest rate regime.

“This is crystal clear that our cost of production with 15 per cent interest will be no match to the cost of production with countries where interest rate has been pulled down to one per cent,” said Aamir Aziz, a textile goods manufacturer and exporter.

The US interest rate has been slashed to one per cent while central banks of most developed economies have also been making sharp cuts in the interest rate.

“This is a short-term arrangement to avoid sudden default as there is no sign of improvement in the economy to overcome the ever widening trade and current account deficit in next two years,” said Aziz.

The IMF said on Wednesday that Pakistan needed another $20 billion to get control over its imbalances.

“Despite the falling prices of oil and other commodities, the global financial meltdown has severely affected Pakistan and it will not allow it to improve its economy and solve its problem,” an analyst said.

Pakistan pays $3.5 billion in debt servicing each year which will increase with the fresh IMF loan. Further, the maturity of Eurobond is due next year while the Paris Consortium loan which was rescheduled due to participation of Pakistan in the war on terror, will also be revived next year.