$9bn IMF loan over two years

LAHORE: Pakistan is likely to sign a $9 billion agreement with the International Monetary Fund (IMF) next week to come out of its economic crisis and shore up its dwindling foreign exchange reserves.

The agreement is expected to be signed between November 10 and 12, Dawn News quoted an unidentified official as saying on Friday.

According to Prime Minister’s Adviser on Finance Shaukat Tareen, Pakistan needs $10 billion to $15 billion to avoid a balance of payments crisis and make adjustments over the next two years.

According to the channel, the official said though the IMF had not announced the size of the aid package, Pakistan would get about $9 billion over two years.

He said Pakistan would get $1.5 billion immediately while the remaining amount would be received in quarterly instalments.

The IMF is expected to ask the Pakistani government to cut fiscal deficit, improve tax collection and reduce the current account deficit, the channel said.

Pakistan needs $3.5 billion to $4.5 billion quickly to fill a financing gap.

Total foreign reserves, including those held by commercial banks, have fallen sharply from $16.5 billion in October 2007 to $6.76 billion on November 1, of which the State Bank of Pakistan accounted for $3.53 billion.

The State Bank’s reserves are less than September’s total imports of $3.807 billion.

Big payments for oil and wheat have been major factors behind Pakistan’s widening trade deficit.

The government is also hoping for assistance from the Friends of Pakistan forum – consisting of China, Saudi Arabia and the United States - which is due to meet in Abu Dhabi on November 17.

Pakistan last entered an IMF programme in December 2001, when it was granted a $1.5 billion poverty reduction and growth facility. It received $1.26 billion under the three-year programme but declined the last two tranches in November 2004.

In an interview with Reuters, Tareen said Saudi Arabia had given a positive response to a Pakistani request for crude oil on deferred payments but had yet to decide how much it could give. Pakistan imports about 82 percent of its crude oil from Saudi Arabia. daily times monitor

Source: http://www.dailytimes.com.pk/default.asp?page=2008%5C11%5C08%5Cstory_8-11-2008_pg1_1