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Pakistan to seek its largest loan package from IMF
WASHINGTON: Pakistan is seeking its largest loan package of up to $8 billion from the International Monetary Fund (IMF) to bail itself out from a severe crisis that threatens to cripple its economy, diplomatic sources told Dawn.
The sources said that the IMF could place strict conditionalities, forcing Pakistan to seek additional loans for meeting those restrictions and this could expand the loan facility to $12bn.
Pakistan began exploring the possibility of yet another loan package with the IMF while the PML-N was still in power and the exploratory talks continued under the interim government as well.
The final decision, however, was announced on Monday night when Finance Minister Asad Umar confirmed that the government was going to the IMF to bail Pakistan out of its foreign currency crisis.
The announcement followed the highest single-day loss in a decade in the stock market, which plunged by over 1,300 points, losing almost Rs270bn of its capitalisation.
On Tuesday, the IMF said that it would listen to Pakistan’s request for financial support “very, very attentively”, as it did with any member with good standing.
Pakistan has received more than a dozen financial support packages from the IMF in the past. It completed the last three-year package of $6.4bn in August 2016, which was 216 per cent of Pakistan’s quota at the IMF.
The previous programme also aimed at “bringing down inflation and reducing the fiscal deficit to more sustainable levels”. It included measures to “help achieve higher and more inclusive growth, in particular through addressing bottlenecks in the energy sector”.
At a news briefing on Tuesday, IMF chief economist Maurice Obstfeld outlined the economic challenges that Pakistan was facing now and also commented on its ability to finance itself.
Asked how would the IMF react to Pakistan’s request for an emergency bailout package, he said: “As with any member in good standing, they are certainly entitled to request financial support from the Fund. So, we will be listening very, very attentively when and if they come to us.”
He noted that Pakistan has “frequently… had programmes in the past several times… and that is a very good sign going forward”.
Published in Dawn, October 11th, 2018
Comments (171) Closed
Big brothers should come to help.A friend in need is a friend indeed.Going to IMG should be last resort.
Difficult days are ahead. It seems the govt has missed the bus. It is testing time for the newly elected govt and will be interesting to see how the govt deals with this crisis. The people of Pakistan must show patience and be ready for bitter pills as situation will not change overnight.
there you go..welcome back to reality..
Nothing wrong in taking loan for development work. Even US has taken loans. But, ensure that, it is used for right purpose. That is where we fail. Hardly 10% of the loan gets used for its real purpose. Reaming goes to the pockets of the corrupt leaders..
Will IMF oblige in a timely manner? That is the question. Even if US does not block IMF from lending to Pakistan, it can delay it for as long as possible and that could be disastrous. Not mending ties with the US was one of the big blunders.
It is a fact that 4 generations of ANP, 3 generations of Bhutto,2 generations of PMLN and JUI has ruled this country and borrowed money for running this country from every available source at any cost but they are all asking and worried that why PTI,the first generation party is going to IMF ,the best and cheapest source in the market.
Pakistan is not eligible for $8 billion amount loan.
Great decision by IK government. IK is a game changer for Pakistan.
In Pakistan progress means taking progressively larger loans.
PMLN Government took a loan of 24.9 Billion is 2015. Correct my mathematics but isn't that more than 8 Billion?
These so called change agents are taking the first step to destry the country. These so called technocrates are misguided and have nothing to do with Pakistan. If we look at the history more loans we take insted of fixing our problems we go deep in to economic cricses especially the common people. The statement " “bringing down inflation and reducing the fiscal deficit to more sustainable levels”. It included measures to “help achieve higher and more inclusive growth, in particular through addressing bottlenecks in the energy sector”. is the biggest deception and a ballant lie. This so called new team looks is depending on the same establishment and westren educated elities who had no idea what the country need. These people raised with silver spoon and left the country and came back as specialist what a joke. This ruling class did not provide any opportunity to masses to get educated who are much smarter. Truly a shameful state of affairs.
IMF may not easily give loan this time considering incapability of paying back such loan with around $60 billion loan payback to be done to China due to CPEC.
Now where has the recent loan from saudi been spent...loan.... pe loan...pe loan.. don't know where we are heading
Finally the world will get to know what China got in return for all the CPEC loans.
I wish the New government makes better decisions and do something to streamline the ecomnomy. I feel everything is in a mess and no one knows what is going on and what to do? Hope this not happens this time.
This is an international conspiracy hatched against pakistan. We don't need bailout. Wait for CPEC to complete we will give a trillion dollars to IMF
Good to see positive intent from IMF. But citizens don’t know what exact crisis we are in. Even IK has not made terms and conditions of previous loans public.
Cut down the internal expenses across the board take big cost cutting steps where needed focus on bringing up the exports rebuild the corporations and small industries how long are we going to keep borrowing funds at high interest cost Imran is doing absolutely the opposite of his campaign promises
Better if FInance miniobe sacked and competent person will be appointed,
Bigger loan means economy needs are bigger, thats a good news in a way! CPEC on completion will reverse the trend and Pakistan will give loan to WB.
This amount can be given by Saudi Arabia as loan without interest, if no means relation are not healthy.
i strongly believe this man and his entire team everything will be alright
It will be the largest loan ever taken in the history of Pakistan. Welcome to Naya Pakistan!
does IMF loan survive Pakistan from crippling its economy ?
What do we have to pledge?
I thought pmln took largest loans and pti is only taken small amount of loan just to pay back..I was wrong this govt going one way forward in take more loans.
Very Good.It's indeed Naya Pakistan in old avatar
Once CPEC gets finished, Pakistan will be an economic hub of the region and will be giving out loans.
What about the economic planning PTI government used to claim and always rejected idea going IMF?
@MG your guess is as good as mine.
The major part is complete. Pakistan has made its decision. Now there is just a small thing remaining.. IMF is yet to decide how much it can give.
Recover $2 Billion each from Sharif crime family and the Zardari crime family and then go to IMF for a $4 Billion loan instead of $8 Billion.
If Pakistan's interests are connected with having good economic ties with the West then why the Politicians always play with emotionalism and hype our relations with China?Calling China the Iron Brother etc.etc.Hopefully IMF and World Bank will come to Pakistan's rescue like they have done in the past.We must not forget that West has provided jobs,Scholarships and Citizenship to our Nationals.Let us appreciate their friendship and work with them as friends.
From where has the money to buy drones come
Gold is old.
You can seek 10 but IMF and USA will decide how much to Lend
Largest loan!
This is game changer for Pak.
By borrowing too much, not focusing on real development and seeking instant gratification from CPEC ex Pakistan leaders have put Pakistan in a Financial mess. Its going to be one of the biggest challenges of the new Govt and also an opportunity to prove themselves by taking Pakistan out of this mess. Time will tell.
@MG your honour,pride,ego to start with
Now this money will be utilized for paying salaries of all Govt employees , expenditures .Some industrial sectors,corporations which are already declared white elephants,buying missiles,tanks,arms ammunition,import bills.subsidies etc. When we will come out of label "loan addicted and China dependent country".
Welcome to Naya Pakistan. This is exactly what a PPP/PMLN government would do so whats the difference after all the noise that PTI made about not taking loans.
Welcome to Naya Pakistan.
@MG the country
That's the real 'Tabdili' we expected from PTI.
Why cant Pakistan get the loans from the friendly countries like Turkey, China, KSA, UAE??
For IMF sovereign pledge is everything. But you have to go strictly by the conditionality of loan. The loan won't be given in one go, but in instalments of 3 to 5 years subject to reviews by them. It will do Pakistan a lot of good in the long term also.
@MG You can pledge the CPEC promissory notes
Pls. remember it needs to be paid back as well.... I don't know, where we are heading to...down 7-8 years... and also IMF generally asks to devalue your currency further.. (loan conditions)..
Just a couple of years back the whole Pakistan celebrated and claimed since the country is liberated from the IMF, it will never go back to them, just in less than 24 months the Pakistan is deciding the "seek the biggest loan" from the IMF, I am bit confused about your old & new statements???
thank you nawaz and zardari and your supporters
hmm I thought China & Saudi would bail out .... I guess the all weather friendship is only for good weather!
A big challenge for the government, opposition will cash this moment in the upcoming by elections.
@Chaman Bahar yes get separatists away asap.
Inexperienced ministers and experienced bureaucrats have put Imran Khan in difficult situation.
Every country has loans with World Bank and IMF. Why so much concern about $8billion loan?
@Rehmat Ali This money is to address the balance of payment gap (obligations in FCY) and not for domestic consumption. For domestic spending you don't need dollars you need rupees, and there are many ways to create or borrow rupees.
Inshallah it would be the last time we go to IMF. Good Luck to govt of Pakistan
@Ahmed Abdullah and you think they wouldn't have conditions or it spare change we are asking for?
First time people got conned by NS/DAR! And second time by this naive dude!
By the way where is the Iron Brother!
@Ahmed Abdullah You call them friendly countries. But do they?
@Indian It's not a game changer. It is simply a loan, and not a developmental loan. Long term structural reforms in the economy would help avoid this in the future.
@Rehmat Ali Imran made blunder mistake by approaching IMF.Whole nation was behind him,Nation was ready to follow his steps, 8 Billions dollars amount was possible to save through cost cuttings such as import bills of Fuel oil,vegetable oil, Imported milk,Imported mobile phones,defence expenditures.Imran Khan should have taken people in confidence and ask people opinion and explain outcomes through a referendum.But he opted his own.
@Bimal William ...it did not miss the bus it was thrown under the bus...
«Confessions of an Economic Hit Man»:
Classical debt trap.
@Riz .. and how much is the internal debt ...the money borrowed from private banks and how they intend to pay it back. change the laws and bring back the looted money...
@Dear Zak So True.... :)
China is also helping but secretly. Just wait and see
So, it's a No More from the iron brother.
@Ahmed Abdullah Even Bangladesh can be asked for loan , they have 33 billion dollars in their reserve.
Bailout!!! Pakistan a nuke power, unbelievable..
@Faraz from IMF?
Well IK told we don't need IMF loan before elections? What's this all about?
In 1980 Pakistan was spending 11% of revenues in debt interest payments which rose to 37% in 2010 and now this figure has gone up to 54%. Half of earnings go into debt servicing.With the rest you squeeze the development expenses. By taking more big loans one day country has to spend almost all revenues in debt servicing.Scary is it not ?
@zak Expecting that IMF will also change this loan into grant one day , same as china will do ?
@Asad The mafia gangs stole much more than 2b >
Now will increase Pakistan's Foreign Exchange Reserve.
use ALL available funds to build dams - but even before that ELIMINATE fuel imports for cars and electricity [to run ACs] - loadshedding 20hrs/ day if necessary.
New looters are in line with a smile on their face.
@Chinpaksaddique If that is the case, IMF will back out. Are you ready to face that situation? You should know your position before posing high. This kind of attitude has brought you to down on your knees.
@Dear Zak .. Please start living in real world.
Where China , Saudi and Turkey have gone?
@Jamil Soomro, New York City You got it right my friend.
@Justicefirst becuase pti themselves issued similar cries and statements against pml n govt!
And how PM started Naya Pakistan Housing Project? Just for face saving, PM started a new project since he is not able to deliver as he promised and by elections are approaching!!
Finance Minister Asad Umar should clearly spell out, off the 8 billion dollar IMF request what percentage goes to nation reconstruction and what share goes to defence.
@Ashish Big brother’s ? How many times big brothers will bail out. If “big brother’s” mean the Middle East countries - then their own long term future is bleak. And big brother China never believe in giving alms.
If loans will be used mostly to fund projects to benefit the politicians themselves, then what's the point? Hoping this government will take conflict of interest seriously.
@Prateik I agree. So the question is: why is IMF giving so much loan knowing Pakistan can never pay it back?
@Jamil Soomro, New York City It is easy to sit in New York and lecture us on foreign policy. Drilling down to reality, the ties with America has been a disaster for Pakistan which lost 100 billion dollars in economic growth and over 100.000 dead and wounded because we were forced to support American war against Afghanistan. All strategic think tanks are saying the same: America is the greatest danger to Pakistan´s deterrence which is basically keeping the Indian strike groups at bay. Also, America alone is not the West. We have excellent relations with UK for example.
@Wellwisher loan, china is making use of $2 billion
@Shah It is just because IMF economists know fully well that once CPEC is completed Pakistan will be catapulted to World No.2 economy and may lend to IMF and also with a sinister plan to alienate Pakistan from China. The western countries are wary of Chi-Pak friendship. In my opinion Pakistan may take loan from IMF, but on its own terms and if not materialised, they should approach China to bail out, which is in China's interest also. Hope, the authorities and the people of Pakistan will take the correct decision.
@Faraz they took in various trenches not in one go ... also they returned quite a big amount and developed massive assets for Pakistan - so most of the loans were spent on massive infrastructure projects - so eventually Pakistan has great number of new assets MA ....
As long as they've a long term plan on getting Pakistan out of this mess, I've no objection with loan. But if there's no long term strategy on how we're going to become self-sufficient then I'm afraid this loan is only going to add to the misery of the people of Pakistan. This also shows if the public doesn't pay their taxes then Govt is left with no other option but to take loans.
@harmony - can't blame the whole thing on to previous government. IK has good intentions but not experienced, they should get good economists who can handle these situations more expertly rather than giving out croud pleasing statements. And part of the blame should go to cpec, which definitely did some predatory lending. No wonder they kept the terms a secret, both China and previous government.
@Concerned Pakistani I couldn't have said it better. Excellent point.
@Justicefirst you forgot 4 generations of generals
I t is surprising China is not giving 8 billion Us$ which is notghing against the 40 Billion $ CPEC and a reliable friend.Obviously China interest rates are much higher than IMF and is not interested in loans . Chinas interest is investment and sale of chinese goods and labour.
@Ahmed Abdullah do you think the government wouldn't have thought about it and tried already before going to IMF???
Should not Pakistan consider deferring and changing big dams plan with Alternate Energy and water management solutions and use that money to Bail Pakistan Out. Have any of the previous Governments been able to come out of IMF Trap. Can Imran be successful in that. Lot of expectations from Naya Pakistan,,,,
Why has China turned its back on Pakistan?
And just yesterday your Kaptaan saab made big claims about steering Pakistan out of grave situation. Is taking big loans his idea of steering Pakistan clear? Sometimes when we look at your politicians, suddenly our own politicians start looking very good in comparison.
No need to take any new loans. Why don't you use the HUGE profits generated through CPEC to pay off the previous loans?
IMF gives loan to developing countries, impose their conditions and get interest - this is their business. So what is the big deal, we are borrowing money to get out of our mess deliberately created by Nawaz Sharif and his hand picked cronies - I say, apply Saudi model and recover all looted money as quickly as possible. As there is no other way that will help us to get out of our current financial mess.
Question is not that whether IMF will extend the loan to Pakistan or not. Because ,it will. Issue is if our new generation of leadership can stop the borrowed money going to waste and end up in foreign accounts,like in the past
Only $8 Billion? Compared to the bailouts of some European nations, such as Portugal and Greece, this is small change - especially for a nation of 200 million, albeit a smaller economy.
@Tamza I think you are right - stolen amount is much higher. I hope we can recover it - somehow.
IMF or no IMF. Keeping hunting down the corrupt people and recover the looted money irrespective of their status and position, things will start to fall into right places automatically. In the end it's all about money.
@Concerned Pakistani Certainly Pakistan has a serious problem of corruption, however, I believe an equally big problem is of incompetence and inefficiency. Even people with good intentions are unable to deliver due to lack of the required set of skills. Most government projects schemes are delayed and exceed their budgeted costs. Somehow this aspect of governance is never highlighted.
Just goes on to prove that "Naya" doesn't necessarily mean "Better".
@Zacki The difference hopefully will be in the way it is spent.
@Ahmed Abdullah Because nobody gives loans to pay off loans.
@Jamil Soomro, New York City "We must not forget that West has provided jobs,Scholarships and Citizenship to our Nationals.Let us appreciate their friendship and work with them as friends." Good salesmanship indeed, even though it is a flopped product. Not because the product is totally bad, but because the potential clientele is reduced to almost nil.
@tatvavetta China has had to invest 150 billion in its own economy because of trade sanctions imposed by US.
@Falcon1
GDP of Greece is around 200 billion USD but it's population is just over 1 crore
GDP of Pourtgal is also in the same range , around 220 billion USD and population of around just over 1 crore
Now compare the ratios with Pakistan and you will get the answer .
@Chinpaksaddique China has certainly helped in bringing Pakistan to this situation where it has no foreign reserves left.
@Shah This is 13th time Pakistan is approaching IMF.
@bangash "Well IK told we don't need IMF loan before elections? What's this all about?" We have only two choices: take loans or revamp the system. When IK said we don't need IMF loans, it meant either we'll take loans from other sources or revamp the system. The other sources were either Saudi or China. Their condition is also revamping the system. So finally, the two choices were reduced to revamp. If you understand what revamping means, you will also understand that IMF would not like that. It has to come up with some solution to reduce the prospect of immediate revamp. IK has already said that if it was on him, 50 people would already have been arrested.
another game changer
@tatvavetta "I t is surprising China is not giving 8 billion Us$ which is notghing against the 40 Billion $ CPEC and a reliable friend.Obviously China interest rates are much higher than IMF and is not interested in loans." It is not the interest RATE of China that is much higher, it is the INTEREST of China. But obviously for you, all INTEREST is reduced to it's RATE, that's why you don't understand why China is not GIVING 8 bn.
@Ashish Dont worry about us. Worry about your $650 billion loan repayments due and your currency against dollor,down sliding fast.
PTI should approach IMF for loan package. Difference now is, PTI will then work to repay this and other loans. As we have an honest government and leader.
IK should have asked overseas Pakistanis to raise Funds for keeping our economy afloat. I am sure they would have obliged.
And first of all, cut the defence funding. It eats up more than 20% of the GDP.
Now that the govt is privy to the actual figures, they know that economic situation is more dire than they had thought. And as I said a few weeks back, overseas Pakistanis will wait to see some change on the ground before they start sending their dollars to Pakistan through proper channels. As for the current economic situation, it happens when public does not like to pay taxes, yet wants everything even done through loans. The words of Hillary Clinton, almost a decade ago,, questioning strategy regarding taxation and population growth, come to mind. Neither of the last two governments took those words seriously.
@bangash "Well IK told we don't need IMF loan before elections? What's this all about?" You are right, he didnt need the loan before his elections. But after him getting elected, he needs the loans.
@Rehmat Ali It takes time, but that time, the cost of repayment would have hit roof top.
If China can give $60 billion then why not $8 billion more in this testing time for iron brother.
@Omer Dude, this government has not even completed 100 days and you are speaking about not delivering on promises. People don't elect a government for a month, the government has 5 years to prove their worth. If it's not then vote against it.
Good, Imran Khan is learning.
IK is a visionary leader after getting loan from IMF he will approach friendly countries for loan to pay back IMF.
Why not go to China as they will give for free
And it’s all going offshore.
@Justicefirst They are asking because Imran khan was the one who said in the past that it is better to commit suicide rather than taking loan from IMF and World Bank
@Bipul Commonsense buddy China is in a mood of collecting now. They want their ROI back.
@Pak We are heading to a point where, no more loans.
@Dear Zak ...And you probably are right on CPEC and funding IMF. Hang around.
@Jamil Soomro, New York City Remember, China is currently in tariff war with US. But the CPEC investments will be rolling in. Its just that PML-N was taking loans to pay loans and syponing off pakistans own money through money laundering, abroad.
@RAJA CHILL It would be, had PTI not come into power.
@George where is yours, while your currency tanks.
IK loves challenges, he will relish this one. And he always wins. IK did Economics at Oxford.
@naveed "nation has been ripped apart by corrupt leader and extreme religious leaders." That's the same thing.
@Karachiwala "Just goes on to prove that "Naya" doesn't necessarily mean "Better". Yes, it will certainly not be better for everyone. Some will suffer, hope it is not the common man.
@Shah Recently Angela Merkel of Germany gave a statement she wants to have good business ties with Pakistan she is from the West .How come you forgot Germany and only thought of U.K.? This is not foreign policy being discussed so don't mix apples with oranges? Remember a friend in need is a friend indeed.Look up the 71 year history of Pakistan and its relationship with the West before posting your comment?
@Prateik and you are the donor?
@Bipul Going to an international lender rather than requesting this nation or that is appropriate for a proud nation and its leader. This is only temporary to ensure ordinary people don’t suffer.
@Dr Salaria, Aamir Ahmad NRPs can’t raise this scale of monies any more than local rich paying taxes until “pips squeak”.
@Bipul Most of those 60 billion was loans, and you have to pay interest on loans.
IMF has a choice: allow China to gobble up Pakistan or help it to survive from the current financial crisis. Now that Sri Lanka also under the radar of Chinese dragon, it is time the West see the light at the end of the tunnel and do the needful.
See what a 'Small man in big office' can do. Does any one realize it. IK should not have opened his mouth on the cost of us Pakistanis. We have to accept, we are nothing in front of India and cooperate with them for our better ment.
@Chandra brcause loan is asked from imf When youvare desperate... investors start running out of our country when you do so... stocks takesbabtumble... and if you cant repay... you only get into more trouble...... india took loan from imf only once on 1991 durung the balance of layment crisis... since then we have only provided monet to imf never asked
@Iddi What reality are you talking about? I'll tell you the reality, reality is, if it weren't for people supporting PPP and PML-N every election, Pakistan wouldn't be in the financial jam, don't blame the new government to keep Pakistan from drowning, blame the ones who brought Pakistan to this point. You can only sit home and play haters, assume some responsibility.
@ashok "suddenly our own politicians start looking very good in comparison"
ha ha! Politicians are the same everywhere.
offshore enrichment beckons.
Stop imports of all luxury items and ban money transfer out of Pakistan except machinery and medicines.
Do it immediately and at least for two years. In the meanwhile reform the Systems in Pakistan, including Banking, Accumulation of Wealth, Capital Punishment for Corruption, Population Control, Education, Cleaning the Country, Industrialization, and Political System.
Current Political System is full of flaws, unworkable and rotten.
@Happy ---Where China , Saudi and Turkey have gone?
When it came to money, suddenly all brothers are hiding.
@Dr Salaria, Aamir Ahmad Unfortunately no leader has the courage to cut defense budget and ask the military for money from the hundreds of mega-businesses they run.
@Dr Salaria, Aamir Ahmad ''And first of all, cut the defence funding. It eats up more than 20% of the GDP.'' Please do not say that again. IK will be out of the office tomorrow if he even thinks like that.
Nawaz sharif can bail Pakistan out by himself no need to go to wb
@Concerned Pakistani Agreed!
IMF does not throw its money without forcing Pakistan to review CPEC.
@zak because no one is going to entertain you anymore by giving loan and making it NPA.
NPA: non performing asset.
@Dr Salaria, Aamir Ahmad, sane voice after qoiet a long time. Your defence budget is 3.5% of GDP before last two devaluations and it is almost 23% of budgeted amount of Pakistan including pension but excluding some unpublished heads.
@Faraz you are almost correct but you mistyped the 2 of $24.9 billion. In normal logarithmic maths 4.9 is smaller than 8 when base is 10. But you can change the base of 4.9 to 20 it's your prerogative, you are then right, 8 is smaller than 4.9 .
people sitting in the IMF are smarter and they are not in need, so stay tuned.
@zak there is no Chinese investment in CPEC, there are loans at high interest rates.
@Ahmed Abdullah these countries are friendly with Nawaz, and not IK.
@Pulakeshi - new hungry looters.
@Justicefirst Because he campaigned against IMF money.
@Concerned Pakistani Do you have any evidence to support that 90% of the loan goes into pockets of the corrupt?
@Iddi Something needs doing to rid ills of past. New government is only a few months old, patience is need to see the results in times to come