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Pakistan, IMF to end 12th unsuccessful loan plan on 30th

19 September, 2011

ISLAMABAD: Pakistan and the International Monetary Fund (IMF) will end 12th loan programme, with tag of unsuccessful after 11 days out of total signed loans of 18 in last 53 years history of relations between two sides as Islamabad got first loan programme from the Fund in 1958.

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ISLAMABAD: Pakistan and the International Monetary Fund (IMF) will end 12th loan programme, with tag of unsuccessful after 11 days out of total signed loans of 18 in last 53 years history of relations between two sides as Islamabad got first loan programme from the Fund in 1958.

The existing Standby Arrangement (SBA) programme will again repeat the old history as it is going to expire on September 30, 2011, on unsuccessful note under which Islamabad failed to draw last two tranches of $3.4 billion.

Pakistan’s history of using IMF resources can be divided into three distinct phases. In the first period—1970 to 1988—Pakistan had four one-year SBAs followed by one three year Extended Fund Facility (EFF).

The special characteristics of this phase were (a) with the exception of two, rest of the SBAs were fully disbursed, (b) there was little emphasis on structural reforms (except in EFF), and (c) repeated approach to Fund resources, in between periods of break.

In the second period, 1988 to 1999, Pakistan had both the short term and multiyear arrangements with the IMF.

Unlike the first phase, these arrangements emphasized on variety of structural reforms along with demand management policies. Almost all the arrangements went off-track sooner or later on account of policy slippages. As a result, throughout this period Pakistan was continuously under one or other IMF programme.

In the third period, 2000-2004, Pakistan availed one facility of SBA and PRGF each. These arrangements were completed successfully as Pakistan met most of the structural performance criteria. With the recovery from macroeconomic crises, Pakistan exited from IMF programme in 2004.

The bad patch relation between Islamabad and the Fund started since 1958 when Pakistan had signed 25 million Special Drawing Right (SDR) under SBA programme, but that programme remained unable to draw single penny and met with failure.

The SDR is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries. SDRs are allocated to member countries in proportion to their IMF quotas. Its value is based on a basket of key international currencies.

The exchange rate in terms of one SDR in comparison with US dollar is standing in the range of $1.3. The second IMF programme was signed in 1965 by securing loan amount of 37 million SDRs that program ended on March 15, 1966, in which Islamabad remained successful for drawing the whole amount during the tenure Gen Ayub Khan.

Third programme under SBA was obtained by Pakistan on May 18, 1972, by signing loan amount of 100 million SDR out of which the country had withdrawn 84 million SDR till the completion of the programme on May 17, 1973.

Pakistan and the Fund had signed fourth SBA programme on August 11, 1974, during the tenure of former Prime Minister Zulfikar Ali Bhutto and that programme ended on successful note on August 10, 1974, as Islamabad had drawn the whole loan amount of 74 million SDR.

Fifth and sixth programmes were signed by Pakistan during the tenure of ZA Bhutto in 1974 and 1977 and both these programmes remained successful as Pakistan had drawn 75 million and 80 million SDR programmes respectively.

During the tenure of another dictatorial regime of Ziaul Haq on November 24, 1980, Pakistan and the IMF had signed loan agreement of 1.268 billion SDRs out of which Pakistan drew 1.709 billion SDRs till 1983.

After long tenure of Ziaul Haq then democracy restored in the country in 1988 and late Mohtarma Benazir Bhutto was elected as Prime Minister with baggage to implement the IMF programme under Structural Adjustment Facility (SAF) that remained successful by obtaining 382 million SDRs till 1992. On the other hand, Islamabad’s economy was facing balance of payment crisis in 1988.

End.


 
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