Pakistan will go for fresh IMF loan
09 August, 2012
KARACHI: Pakistan will seek fresh loan from International Monetary Fund (IMF) in order to lower the immense pressure on foreign exchange reserves, sources in the Ministry of Finance (MoF) said on Wednesday.
KARACHI: Pakistan will seek fresh loan from International Monetary Fund (IMF) in order to lower the immense pressure on foreign exchange reserves, sources in the Ministry of Finance (MoF) said on Wednesday.
The economy of the country has been badly hit by huge government borrowing, power and gas crisis and uncertain political and law and order situation, analysts said.
The coming months till December 2012 are vital for the government as the economic indicators are not favouring the country's economic situation, said analysts.
Modalities are being carried out for a meeting of IMF officials and Pakistan's finance managers, the MoF sources added.
November 2012 and February 2013 are on the agenda for arranging talks between IMF and Pakistan officials while new terms for seeking new loan are underway, sources added.
The IMF would prefer to talk with the elected government representatives rather than members of the caretaker government, said a foreign currency expert in Texas, USA Fazal Ahmad.
The IMF is still pressurising Pakistan to initiate economic reforms to tackle challenges the country is facing.
Without additional sources of revenue besides debt retirement and import bill's huge expenditures will put further pressure on Pakistan's foreign exchange reserves, Ahmad added.
It is apprehended that it will be difficult for the country to survive economically, if the present trend of dependence on foreign help will persist for a few years more.
Pakistan will also look for fresh fiscal 2012-13 loans for the retirement of the remaining IMF's Stand-by Arrangement (SBA) facility.
Pakistan has to pay $3.4 billion in 2012-13, $3.43 billion in 2013-14 and $1.35 billion in 20114-15 to retire IMF's loan, he added.
He said Pakistan would possibly face a 5.0 percent increase in value of IMF loans repayment due to dollar-rupee parity in the next three to four years.
The country's foreign exchange reserves will continue to face pressure due to payment of IMF loans in the next more than three years, he added.
The IMF has been pressurising Pakistan to initiate economic reforms to tackle challenges the country is facing.
The government was still unable to implement key benchmarks agreed with the IMF, bringing the central bank's borrowing to a desired limit, enforce general sales tax (GST) on goods and services in integrated mode, eliminate power sector subsidies and keep the budget deficit within the agreed limits.
The move by Pakistan government to choose short-term gains over long-term economic stability is risky.
The IMF wants Pakistan to raise tax revenue from the present 10 percent of gross domestic product (GDP) to 15 percent of GDP by 2013, which is peril for the economy.
The government failed to focus on growth-oriented policy for reducing unemployment in the country besides borrowing that should be reduced in order to bring down the interest rate.
The IMF is not happy over the performance of Pakistan government as the government failed to decrease Rs 1 trillion financial deficit besides provided power subsidy of more than Rs 295 billion, which annoyed the donors.
The fund also put a proposal before Pakistan that surplus cash crops would be kept under the IMF supervision, he added.
There is a compulsive need for reorientation of fiscal approach from external assistance to boosting of agricultural and industrial production, which has unfortunately remained static for years now, he added.
During the current fiscal year until May 18, 2012, Pakistan has made debt payments amounting to $2.53 billion (inclusive of $809 million to IMF) and other miscellaneous payments of $1.52 billion, while receipts from multilaterals and others amounted to $1.21 billion.
The second instalment under IMF's SBA facility amounting to $394 million has also been successfully made on May 25, 2012.
IMF payment schedule :
2012-13 $3.4 billion
2013-14 $3.43 billion
20114-15 $1.35 billion
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