IMF approves US$6.7b loan to Pakistan


The International Monetary Fund threw Pakistan a $6.7 billion lifeline on Wednesday to help the struggling nuclear-armed country achieve economic reforms, particularly in its troubled energy sector.

The IMF executive board authorised a three-year loan, making an initial disbursement of $540 million available to the Pakistani authorities.

The remaining amount will be evenly paid out over the duration of the programme, subject to the completion of quarterly reviews, the Washington-based global lender said.

In its announcement of the loan on Wednesday to the government of Prime Minister Nawaz Sharif, the IMF said that Pakistan’s adherence to the programme would likely encourage financial support from other donors.

“Despite the challenges it faces, Pakistan is a country with abundant potential, given its geographical location and its rich human and natural resources,” the IMF said.

“The authorities’ programme is expected to help the economy rebound, forestall a balance of payments crisis and rebuild reserves, reduce the fiscal deficit, and undertake comprehensive structural reforms to boost investment and growth.”

The IMF aid is an Extended Fund Facility, a type of assistance aimed at helping a country that faces serious balance-of-payments problems because of structural weakness that require time to address.

The repayment period for an EFF loan is between 4.5 and 10 years.

The loan is aimed at reducing Pakistan’s fiscal deficit – which neared nine percent of gross domestic product last year – to a more sustainable level and reform the energy sector to help resolve severe power cuts that have sapped growth potential.

The country’s daunting array of problems range from an energy sector crippled by $5 billion of debt to dwindling foreign exchange reserves and a sinking currency, all the while facing down a Taliban insurgency.

Economic growth has sputtered in recent years. Gross domestic product growth rose 3.7 percent in 2012 and is forecast to decelerate to 3.5 percent this year and to 3.3 percent in 2014, according to the IMF’s latest projections.

Growth has been “well below that needed to provide jobs for the rising labor force and to reduce poverty,” an IMF mission in Pakistan reported in July.

The request for a loan came just weeks after May elections that marked the country’s first democratic transition of power, putting Sharif in office.

The new loan came after months of negotiations. Pakistan abandoned a previous $11.3 billion IMF loan programme in 2011 after refusing to carry out strict financial reforms, and still owes about $4 billion to the Fund.

The political situation in Pakistan is expected to pose a challenge for the IMF.

“There isn’t any doubt that it’s going to be an extremely difficult programme for the IMF to oversee,” Jacob Kirkegaard of the Peterson Institute for International Economics told AFP.

“Pakistan is a country where the military continues to have a very large role not just on national security but also on a large part of the economy,” he said.

Kirkegaard added that it was “very unlikely” the military would go along with certain reform measures under the IMF loan-supported programme.

“If Pakistan was not a nuclear-armed country, the dominant countries at the IMF board would probably be less interested in trying everything possible to stabilise the situation there,” he said.

Source : Channel News Asia | September 5, 2013


About thomasdinnocenzi

Thomas D’Innocenzi is a highly accomplished, results-focused international consultant with extensive experience in global sourcing and business development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global marketing and sourcing operations. He has extensive experience in international business development to accommodate rapid growth. Skilled in building top-performing teams, bench-marking performance, and developing organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. Tom founded Nova Advisors with the mission of providing expert Global Business Development consulting services for companies seeking to expand their market share as an independent consultant. Tom has a network of experts and advisors throughout the Asia-Pacific region and North America. His expertise includes business development, global sourcing, manufacturing, commodities, logistics, QA/QC, FDA, regulatory compliance, sustainability, and supply chain optimization. Tom is experienced in the medical device, apparel, consumer goods and technology services verticals helping companies advance their global sourcing capabilities and develop new markets through a local and sustained approach. Located in SE Asia and the United States, Tom expands market reach to drive sales. His global sourcing strategy includes directly negotiating with commodity suppliers, supply chain networks and distributors for optimal terms based on his expertise and first-hand knowledge of the players. Contact Tom to use his consulting service to increase your global market and make global sourcing profitable for you in the Asia Pacific Region and the United States. USA Direct: +1.904.479.3600 SINGAPORE: +65.6818.6396 THAILAND: +662.207.9269
This entry was posted in Business, Economy, Global Sourcing and tagged , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s