Islamabad may not ask IMF to increase loan

[LahoreEstate]

Monday, March 30, 2009
Fund to approve $840m for Pakistan today

By Mehtab Haider

ISLAMABAD: Pakistan is having second thoughts about its decision of asking the IMF to jack up its loan amount by $4.5 billion —from $7.6 billion to $12.1 billion — after receiving generous capital inflows from bilateral as well as multilateral creditors, saying it may seek a reduced amount from the fund in order to avoid further debt burden.

“Yes, we will review this new situation as Islamabad has received sufficient resources to meet its external accounts requirement. We will take a decision in this regard within the next two weeks before going to attend the annual spring meeting of the IMF/WB,” Economic Adviser Shaukat Tareen said while talking to The News.

However, official sources in the government said Pakistan would take the final decision about the additional size of funding from the IMF after knowing the response of the Friends of Pakistan (FoP) forum, which is going to meet on April 17 in Tokyo, eight days before the two-day annual spring meeting of the IMF/WB beginning from April 25 in Washington.

Pakistan has sought multibillion dollar funding from the FoP forum for budgetary and balance of payment support. There will be two sessions on the occasion of FoP forum: one for project-related assistance and the second one will be done in the shape of Donor’s Conference on April 17 at Tokyo.

The growing debt burden is a cause of worry for the economic managers and they are trying their level best to persuade the donors for provision of grants mainly for the social sector in order to reduce burden on the budgetary side.

Tareen said the Obama administration had announced $1.5 billion per annum assistance for Pakistan. It is a welcome move and Pakistan will receive $7.5 billion in next five years, he maintained.

Pakistan, the advisor said, has not yet formally approached the IMF for jacking up its quota from five times to eight times under the Standby Arrangement (SBA) programme that could translate into additional funding of $4.5 billion for Islamabad. “We will analyse our external front requirements before formally discussing this issue with the IMF during the next annual spring meeting,” he added.

If Pakistan’s external accounts requirements could be managed with the reduced amount then why Islamabad will seek more funding, paving the way for increased debt repayment liabilities, he questioned.

He said Pakistan had not yet taken decision on how much additional funds Islamabad would get from the IMF after receiving inflows from various avenues. He said the approved amount of $500 million by the World Bank under the Poverty Reduction and Economic Support Operation (PRESO) would be received on Monday. The ADB’s $100 million will also be received within next few days as Balochistan’s money from the ADB had not yet been received.

He said the World Bank will approve $500 million under the Poverty Reduction and Economic Support Operation (PRESO) on Monday. ADB’s $100 million will also be received within a next few days as Balochistan’s money from the ADB had not yet been received.

He also said the IMF’s executive board was all set to approve $840 million instalment of the $7.6 billion under the SBA programme on Monday. The disbursement of the $840 million instalment will be received soon after its approval.

Pakistan, he said, would review the financial situation in details before formally approaching the IMF to increase its quota from five times to eight times under the ongoing 23-month SBA programme.

http://www.thenews.com.pk/top_story_detail.asp?Id=21220