Pakistan may seek additional $4.5 billion from IMF

[Naveed Yaseen]

By Sajid Chaudhry
ISLAMABAD: Pakistan would seek additional $4.5 billion Stand by Facility from International Monetary Fund (IMF) in June this year in case financial assistance from Friends of Democratic Pakistan (FoDP) is delayed.

Pakistan would receive $2.5 billion by end June 2009. World Bank and Asian Development Bank have sown willingness to finance mega dam projects with increase in annual lending volume for Pakistan. United States has also agreed to start Free Trade Agreement (FTA) negotiations along with finalizing Bilateral Investment Treaty (BIT).

FODP: Shaukat Tareen, Advisor to Prime Minister on Finance and revenues, in a media briefing after a month long foreign tour, termed Tokyo FODP Conference as success and informed that Pakistan has received encouraging response from FODP as against the expectations of $4 billion, $5.28 billion pledges were made in the Tokyo meeting. Explaining the composition of pledges, advisor informed that $600 million would be in the shape of grant and soft loans, $400 million as budget support and $4.3 billion as project financing. Apart from these said pledges, Britain, Norway and Switzerland are in a process of finalising increase in their annual aid for Pakistan and decision would be made soon.

He informed that FODP social sector financial assistance would be used for four interventions like cash support and poverty reduction, skill development, medical insurance for poor and job creation at tehsil level. Remaining assistance would be used for education and health sector development, he added.

IMF: Tareen informed the country achieved all the performance benchmarks set for the period under discussion. He informed that IMF has allowed Pakistan to increase its budget deficit from projected 3.4 percent to 4.3 percent. He said that Pakistan would seek additional loan from IMF on incase the assistance from FODP faced delay and if needed, Pakistan would ask for Stand by Facility that would be 300 percent higher against the allocated quota. IMF has also allowed Pakistan to use this additional loan for financing its initiatives like promotion of agriculture, manufacturing and infrastructure that are required to build sound base for economy.

The International Monetary Fund (IMF) would recommend the release of $840 million to Pakistan, the third tranche of a loan. “Therefore, in a board meeting in mid-June, they will recommend release of a tranche which amounts to about $840 million,” Tareen said.

WB: He informed that World Bank has agreed to enhance its lending under three year lending programme. We have asked World Bank to assist in development of agriculture sector and mega infrastructure projects like big dams and WB authorities have agreed to consider it. WB has also agreed to lend for construction of transmission line from Tajikistan via Afghanistan to Pakistan for import of 700MW power in first phase and low cost 3000MW hydel power in second phase.

Pak-Libya: During the President of Pakistan visit to Libya, both the countries have agreed to enter into Strategic Economic Partnership under which Libya has demanded manpower, help in infrastructure, banking sector and agriculture sector development. Pakistan has invited Libyan companies to invest in oil and gas sector of Pakistan. He said that Pak-Libya holding company would pursue cooperation in these areas for bilateral benefits.

He said that during US visit a remarkable achievement has been achieved and USTR has agreed to start bilateral Free Trade Agreement (FTA) process. We have demanded increase in area of Reconstruction Opportunity Zones (ROZs) with inclusion of Balochistan.

Tareen informed that Pakistan is to receive around $2.5 billion by end June 2009, IMF $840 million from IMF, $800 million from WB, $600 million from ADB, $23 million from IDB and $1 billion from US.

Responding to questions, Tareen informed that the government would not be able to run the country on Petroleum Development Levy (PDL) and the government would soon finalise a transparent mechanism of POL price fixation. He said that inflation might come down to single digit by October 2009 as against earlier projection of July 2009.

Budget 2009-10: Tareen informed that during IMF talks four new sectors have been identified for expansion in tax base. However, he made it clear that only two new sectors would be taxed in the next fiscal year 2009-10. He said focus of the next budget would be on revenue generation for poverty reduction, promotion of agriculture, manufacturing, energy sector development and infrastructure development. “We don’t want to increase tax rates, our focus in to tax new sectors for increased revenue generation”.

http://www.dailytimes.com.pk/default.asp...2009_pg5_5