LAHORE, Sept 10: The government expects to get the first tranche of $500 million of $1.3 billion Asian Development Bank (ADB) loan before the end of this month as the hitch of a clearance by the IMF has finally been removed.

A senior official in the federal finance ministry, who did not want to identify himself, claimed while talking to Dawn from Islamabad on Wednesday that the International Monetary Fund had “issued” the Letter of Comfort (LoC) to pave the way for the release of the ADB programme loan to Pakistan.

The loan, part of the financial sector reforms programme, will be used by the government to support its budget.

The tranche will also help the government slightly shore up its dwindling stocks of foreign exchange reserves, which have already dropped below $9 billion on the back of rising oil, food and other import payments from a record high of $16.4 billion in October last year.

The current account gap too expanded to above eight per cent of the gross domestic product (GDP) to above $20 billion during the last fiscal as trade deficit rose to over $14 billion. The current account deficit had grown 24 per cent to more than $1 billion in July this year from same period last fiscal.

The government direly needs foreign capital inflows in the form of multilateral and bilateral loans, aid, grants, foreign direct investment and private transfers in order to improve its forex reserves.

The official said the government also planned to float sovereign bonds in the international financial markets to raise funds. But he did not give any idea of the size of the loan the government intended to raise from the global financial markets.

“No one can give the idea of the size of the funds we are going to rake up from the global financial markets. It will be known only when we enter the market. We don’t yet know what would be the response of the international investors to our offer,” the official said.

He said the bonds would be floated at an “appropriate time” in order to keep down the spread on the sovereign paper. “That’s why I cannot tell you the exact date or month when the bond would be floated,” he said in answer to a question.

He said Islamabad had asked the Saudi government to extend it the oil on deferred payment for next two to three years to ease the pressure on its resources.

Pakistan buys 110,000 barrels of oil per day from Saudi Arabia and the extension of the facility would automatically help it’s the government plug bleeding of meagre foreign exchange reserves.

He, however, expressed his ignorance about the negotiations with Riyadh for an economic package for Pakistan to bail it out of the current economic crisis. “I’m not aware of any such development,” he said when he was told that the finance minister was reported to have stated that the Saudi government was putting together such a programme for Pakistan.