The International Monetary Fund (IMF) on Thursday agreed to provide Pakistan with a three-year loan worth $5.3 billion to help boost the declining economy, with Finance Minister Ishaq Dar claiming that the international lender had been requested to provide another $2 billion under the bailout package of the due share of Pakistan.
Addressing a joint press conference, Dar and IMF Adviser Jeffrey Franks told reporters that both sides had agreed on a loan accord of $5.3 billion.
On the occasion, Dar was full of praises for the international lender, stating that the IMF officials had played a positive role in negotiating the deal with Pakistan.
Franks, however, said the loan was subject to further approval within the IMF and it would then go to the executive board for approval in early September.
“We are entering into a fresh programme with the IMF to not only retire our past liabilities but also to bring about structural reforms in the country. We have successfully agreed over a programme that is home-grown and consistent with the new government’s policies,” he said, asserting that Pakistan had made another request to the IMF of provision of another $2 billion that had been refused due to indiscipline of the former government.
Though Prime Minister Nawaz Sharif in his first speech to his party’s parliamentary group had vowed to break the “beggar’s bowl”, Dar on the occasion expressed his helplessness on seeking a bailout package from the IMF, stating that there was no option but to request for the loan to save Pakistan from imminent default.
“We have not carried the begging bowl in our hands nor are we getting a grant. It’s a home-grown programme and has been agreed on our own conditions. Pakistan can ask for help from the IMF as it is a member of the IMF,” he added.
Dar said the crisis Pakistan was facing was because of the fiscal indiscipline practiced over the past few years.
Elaborating the loan’s details, IMF adviser Jeffrey Franks said this was a programme which was being supported as part of IMF Extended Fund Arrangement.
“Under the program, $5.3 billion will carry a floating interest rate of three percent and it would be payable over a longer period than conventional arrangements to facilitate Pakistan in repaying the loan,” Franks explained.
The IMF adviser also confirmed Dar’s claim that the loan agreement was “home-grown” for Pakistan, stating that it was a Pakistan-designed and built programme.
Franks added that Pakistan government had developed plans to improve tax collections through improved administration and through a mechanism to eliminate loopholes in the coming years. “The difficult decisions have already been made,” he asserted, adding that the agreement had been reached with Pakistan’s business climate in mind and “will serve to bring about the much needed restructuring in Pakistan’s economy”.
Franks hoped that the announcement of support from the IMF would encourage other development partners to extend a helping hand to Pakistan.
Dar said the objective of the loan was to bring down the fiscal deficit, touching 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 that an agreement with the State Bank of Pakistan was also designed to help rebuild forex reserves and keep inflation at acceptable levels.
He said Pakistan also had a programme to restructure and even privatise public sector enterprises, which would generate significant revenues.
Dar added that the overall focus on the IMF programme was to boost economic growth, “so we can have a better future for all Pakistanis”.