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WASHINGTON: Pakistan has decided to seek a new financial arrangement with the International Monetary Fund amid concerns that it may not be able to repay its foreign debts in the next financial year without external support, official sources told Dawn.
Pakistan will require $4.3 billion next year just to pay off the IMF debt.
In February, Pakistan started repaying a $7.6 billion loan it had received from the IMF under a standby arrangement signed in 2008.
It paid a total of $399 million in February and by the end of the current fiscal year, it has to pay a total of $1.3 billion.
It aims to “pay the rest by May” and a member of the Pakistani delegation to the IMF spring meetings in Washington said that “we would like to have a new arrangement with the IMF as soon as possible”.
The government has already held several rounds of talks with the IMF on a new loan arrangement but the lending agency seems unhappy with Islamabad’s response to suggested economic reforms, particularly for the lowering of fiscal deficit and improving tax-to-GDP ratio.
Discussions on a new loan arrangement, however, resumed in Washington this week as Finance Minister Hafeez Shaikh and other senior officials of his ministry arrived in the US capital to attend the spring meetings.
A recent IMF report on Pakistan’s economy noted that the country’s gross external financing requirements in the next fiscal would be $10.5 billion while its ability to repay loans would weaken significantly in fiscal 2012-13.
In their meetings with the Pakistani delegation, IMF officials underlined the country’s rising commodity prices, surge in the oil import bill and the upcoming deadlines on repayments.
All these factors will combine to diminish the country’s foreign currency reserves, IMF officials warned.
But Finance Minister Dr Abdul Hafeez Shaikh told reporters that international financial institutions still had confidence in the Pakistani economy, which reflected in an “unprecedented $1.8 billion loan” the World Bank recently approved for development projects.
The World Bank is also helping Pakistan raise funds for the multi-year Dasu dam on the Indus River in Kohistan, with a capacity to generate 1500MW of electricity.
“This is a big sign of confidence in Pakistan’s ability to accomplish development for its people that the World Bank is allocating an unprecedented amount in one year,” Dr Shaikh said.
