The loan would represent the 13th bailout since the late 1980s from the IMF to Pakistan, which is facing a balance-of-payments crisis triggered by high fiscal and current-account deficits and dwindling foreign exchange reserves.
Tuesday 14, May 2019
(Bloomberg) --Pakistan and the International Monetary Fund (IMF) reached an agreement on a loan of about $6 billion designed to help the South Asian nation avert an economic crisis.
Ernesto Ramirez Rigo, IMF’s Mission Chief, said that the lender’s executive board will meet to approve the agreement for the 39-month loan, subject to the timely implementation of prior actions and confirmation of international partners’ financial commitments.
The pact was reached after Prime Minister Imran Khan overhauled his economic team, including the installation of Reza Baqir, who previously served in senior positions at the IMF, as the central bank governor.
Rigo noted the efforts to stabilise the nation’s economy but said more needs to be done.
“Decisive policies and reforms, together with significant external financing are necessary to reduce vulnerabilities faster, increase confidence, and put the economy back on a sustainable growth path,” Rigo said.
Abdul Hafeez Shaikh, an Economic Adviser to the Prime Minister, said that there had been some overspending by the government, so to recover costs we will have to increase prices in certain areas of the economy.
The IMF facility should be taken as a programme of structural changes and its success depends upon how successfully the country implements it, Shaikh said.
The crisis prompted rating companies to downgrade Pakistan’s credit score, triggering an 18 per cent slide in the nation’s currency and pushing the benchmark KSE-100 Index of stocks to near the lowest level in almost three years.
Prime Minister Khan has faced criticism from economists and the opposition parties for delaying the loan and mishandling the economy. Khan had said the loan programme was delayed as he set about securing $3 billion of loans each from Saudi Arabia, the UAE and China.