IMF 'offers' Pakistan additional $4bn financial package

[Naveed Yaseen]

By Sajid Chaudhry
ISLAMABAD: The Inter-national Monetary Fund (IMF) has offered Pakistan additional $4 billion financial package for Pakistan instead of increasing Pakistan's quota by 200 percent, Official sources at Ministry of Finance told Daily Times.

Pakistan sought an increase from the International Monetary Fund (IMF) in its quota by 200 percent to plug the gap between expenditure and revenues.

Pakistan, as a precautionary measure, has placed a formal request before the IMF Board for approval of at least $4 billion additional financing as an "Insurance Cover" against possible delay in so-called Friends of Pakistan pledges for 2009-10.

IMF board is expected to consider and approve the additional financing needs of Pakistan amounting to $4 billion in its meeting scheduled on August 7, 2009 along with $840 million tranche of $7.6 billion Stand-By-Arrangement.

According to the official sources, in case IMF Executive Board approved $4 billion additional financing for Pakistan, the government would not ask for its disbursement immediately. Additional finances to the tune of $4 billion would be made available to Pakistan, upon its request, in next two years in $2 billion tranche each in 2009-10 and 2010-11, official sources explained.

The next and crucial meeting of Friends of Democratic Pakistan is scheduled at Turkey in the month of September. In this meeting the donor institutions and bilateral donor countries would discuss with Pakistani authorities development plans and disbursement schedule in the ongoing fiscal year 2009-10.

Incase FoDP pledges of $2 billion are not materialised during the ongoing fiscal year 2009-10, only than government of Pakistan would request IMF authorities for disbursement of first tranche of $2 billion in 2009-10. The remaining $2 billion out of $4 billion IMF additional financing would be made available to Pakistan in 2010-11 on Islamabad's request, official sources explained.

Pakistan would return $4 billion additional finances to IMF soon after receipt of pledged money from FODP as keeping outstanding the additional financing would be too costly for it.

Currently, government of Pakistan has received $3.947 billion under 24 months Stand-By-Arrangement (SBA) from IMF. The third tranche of around $840 million was due by June 30, 2009. However, due to the delay in the announcement of federal budget from June 6 to June 13 the next IMF review meeting was resultantly rescheduled from second week of June to July 2009.

Pakistan's economic managers were confident of getting around $840 million third tranche in July after a successful review meeting at Istanbul in first and second week of July. But the government backed out on major performance benchmark of elimination of power subsidy by July 1, 2009.

The government officially announced that it would not eliminate power subsidy until load shedding is totally eliminated in the country and it decided to approach World Bank authorities at Washington and IMF authorities at Istanbul for seeking possible waiver on elimination of power subsidy.

This issue emerged as critical one during Istanbul IMF review and IMF authorities asked Pakistani authorities to agree on revised schedule of elimination of power subsidy with its two other major development partners-World bank and Asian Development Bank.

Government of Pakistan has recently reached an agreement with WB and ADB authorities on power tariff increase through elimination of power subsidy starting from October 2009.

http://www.dailytimes.com.pk/default.asp...2009_pg5_2