KARACHI, Nov 24: The expected IMF loan would not be a miracle for economy, but would certainly tighten ‘some loose ends’ at the cost of slowdown of economic growth, analysts and market sources said.

Instead of feeling confident, traders and industrialists found the IMF lending as anti-growth and recessionary.

Pakistan negotiated $7.6 billion loan with the IMF and expects to get it in the next couple of weeks.

However, analysts said the IMF loan will strengthen the exchange rate, increase foreign exchange reserves and improve the country’s ability to pay import bills.

Members of various chambers of commerce and industries have been meeting with government officials and State Bank leadership to explain their problems, which would only aggravate in the wake of high interest rates and tight monetary policy.

“The working capital is no more working as cost of borrowing is too high,” said Aamir Aziz, an exporter and manufacturer of readymade garments.

He said 20 to 22 per cent interest could easily kill the entire business sector of this country, especially the exporters would not survive.

“High interest rate of 20 per cent with an inflation of 25 per cent means no business is feasible in the present cut-throat competition unless margin of profit is more than 50 per cent,” said Mr Aziz.

The government claims that the IMF loan would strengthen economic fundamentals and prove helpful for the economy.

“If $3-4 billion is immediately received from the IMF, Pakistan’s dwindling forex reserves are likely to get a major boost and can reach close to $9 billion (11 weeks of import cover) from the current $6.7 billion (8.5 weeks import cover) by the first week of December 2008,” said Farhan Rizvi, an economist at the JS Research.

“Rupee will float in the range of 75-80 versus the dollar in the short-term. We have already seen rupee strengthening by 1.5 per cent against the dollar last week, especially after the announcement of request for funding from the IMF by the government,” said Mr Rizvi, adding that the rupee could strengthen further once the first tranche of $3-4 billion is received.

However, other researchers and analysts were of the view that the IMF loan would have a limited impact on overall economy.

“The cut in development expenditure and tight monetary policy under high interest rate will have a negative impact on economic growth,” said Shabir Adil, an economist teaching at a private college. He said slow economic growth would simply add to the already existing unemployment, reduce savings rate and slash public consumption, which runs the economic wheel.

The key-watchers of the economy expressed concern over slowing down of economy and believed that the IMF could be avoided.

“Lack of planning and strategy from the government side is responsible for this IMF “anti-growth package,” said Aamir amid fears that the textile industry would be the worst hit, and hundreds of thousands of people may lose jobs.

He said that with the slowdown of economy, growth would decline and once again trade and current account deficit problem would emerge to grip the economy, forcing the government to keep asking for more IMF help.

“After witnessing a balance of payments deficit of $5.7 billion in fiscal year 2008, pressures have continued with deficit of $5.1 billion in July-Oct FY09, mainly driven by widening current account deficit and lack of foreign inflows,” said Mr Rizvi.