Pakistan on Thursday asked the International Monetary Fund for a $5.3 billion, three-year loan to boost growth in a bid to rebuild foreign exchange reserves and combat both an energy crisis and a sliding currency.
The move, which was widely expected, comes just weeks after the new government was sworn into office after May elections marked Pakistan's first ever democratic transition of power.
The nuclear-armed state abandoned a $11.3 billion IMF loan program in 2011 after refusing to carry out strict financial reforms.
That package had been agreed in November 2008 to stave off a balance of payments crisis just months after the last elections.
Finance Minister Ishaq Dar said there was no option but request the loan to save Pakistan from defaulting.
"We have not carried the begging bowl in our hands nor are we getting a grant, Pakistan is a member of IMF," Dar said.
"The government of Pakistan and International Monetary Fund have reached an agreement for a three-year programme of at least 5.3 billion dollars under an extended fund facility," Dar said.
He presented the programme as "homegrown and entirely of our own making," and said it included a reforms agenda largely in keeping with the election manifesto of the ruling Pakistan Muslim League-N.
"In this sense, this programme is consistent with the policies of the new government," he said.
IMF Pakistan Mission Chief Jeffrey Franks said the loan was subject to further approval within the IMF and would then go to the executive board in early September.
The interest rate would be set at three percent and that the loan would be payable over a longer period than conventional stand-by arrangements, he added.
Franks said the aim was to bring down the fiscal deficit -- which neared nine percent last year -- to a more sustainable level and reform the energy sector to help resolve severe power cuts that have sapped growth potential.
He added an agreement with the State Bank of Pakistan was also designed to help rebuild forex reserves and keep inflation at acceptable levels.
As part of the loan agreement, Franks added, Pakistan has plans to improve tax collection and to eliminate tax loop holes and exemptions.
It also has a programme to restructure and even privatise public sector enterprises, which would generate significant revenue, he said.
"The overall focus on this programme is to boost economic growth so we can have a better future for all Pakistanis," he said.
"There will be some difficult decisions... but these will be necessary decisions to make sure that the economy is stable going forward."
Franks said he hoped that other development partners, including the Asian Development Bank, the World Bank and bilateral donors would also be able to increase their support to Pakistan.
When unveiling the budget last month, the finance minister promised to reduce Pakistan's crippling 8.8 percent budget deficit to four percent within three years.
CihanGüncelleme Tarihi: 05 Temmuz 2013, 10:42