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Pakistan seeks IMF bailout

Published Jun 19, 2013 06:48am


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— File Photo
— File Photo

ISLAMABAD, June 18: Pakistan and the International Monetary Fund (IMF) are opening on Wednesday week-long discussions on Islamabad’s latest fiscal and macroeconomic adjustments and its request for a possible $5 billion bailout package for repayment of the fund’s outstanding loans.

A senior official of the ministry of finance said the government had made a fiscal adjustment of about 2.5 per cent of GDP in its budget for 2013-14 to reduce fiscal deficit from 8.8pc to 6.3pc of GDP during the next financial year and hoped it would convince the IMF into agreeing on a new Extended Fund Facility (EFF) of about $5bn repayable in 10 years.

Pakistan’s top priority during the talks will be to secure a letter of comfort from the IMF to pave the way for resumption of programme loans by the World Bank and the Asian Development Bank held up since 2009 after suspension of the IMF programme on failed reforms.

Pakistan will also brief the IMF mission on its plans to settle over Rs503bn of energy sector circular debt before the middle of August and a roadmap to restructure the power sector and further fiscal adjustment of 1.3pc of GDP in 2014-15 and 1pc of GDP in 2015-16 to bring down fiscal deficit to about 4pc of GDP.

The official said that as part of preparations for talks with the IMF, the government has decided to avoid quarterly increases in electricity and gas tariffs — an old demand of the fund to bring energy prices to market-based tariffs by eliminating all subsidies.

Finance Minister Ishaq Dar told journalists recently that the IMF mission would remain in Pakistan from June 19 to July 3 for substantive talks and post-programme monitoring of the existing programme but a senior official said the talks were expected to be concluded by June 26.

The two sides are required to hold biannual review of Pakistan’s economic situation as part of Post-Programme Monitoring (PPM). At the end of discussions, Pakistan is expected to make a formal request to the IMF for a new EFF programme. The mission will submit Pakistan’s request as well as its assessment report to the IMF executive board.

The official said the authorities were comfortable with foreign exchange reserves till the end of July even after repayment of about 450m special drawing rights (IMF currency) – about $675m.

However, the authorities are not comfortable about some heavy repayments due to the IMF in October-November when Pakistan has to repay 1.685m SDRs ($2.5bn) that could reduce reserves to a critical level and put pressure on exchange rate.

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Comments (8) Closed

mehboob malik Jun 19, 2013 10:33am

Where is Mian Nawaz Sharif's broken KASHKOL?

salim Jun 19, 2013 10:50am

Unless Pakistan keeps it Accounting clean, Pakistan cannot be socially or economically viable. Here it goes again with the IMF

Mohammad Ataullah Jun 19, 2013 06:32pm

Why r we taking IMF loans from a pro-Israeli Zionist Jewish USA (United Satans of America) entity, who only wants to rob, make countries destitute & waging war against Islam & Muslims? When Allah, SWT with His Grace & Mercy has given us all the resources that we need to export, sell & make money? If it is not for deceitful, greedy sinful politicians who want to full their pockets. May Allah, SWT bring His curse on them, Ameen!

yaqoot mir Jun 19, 2013 07:19pm

And here we go again loans to pay off loans? wow.....Pakistan we salute you.

sharjeel Jun 19, 2013 11:53pm

finishing subsidies on electricity will increase the problems for poor people so, Govt. must increase subsidy instead of decreasing.

sheikh Jun 20, 2013 12:43am

@mehboob malik: It never existed. Kashkool has been whole since the start.

Amin Jun 20, 2013 05:24pm

@Mohammad Ataullah: Yes, put all the blame on politicians and like your nation is washed in honey and milk. It is not politician but the nation to blame, after all politicians are the flip side of the same coin. Most of the Pakistanis are willing to indulge in corruption at the drop a hat. So please spare us the sermons.

a Jun 20, 2013 08:09pm

Mian saab's first strategy to save Pakistan, beg others for money. This has become a joke honestly.