Imf To Renew Loans To Pakistan

The impression that Pakistan had won some economic breathing space sent stocks surging on the Karachi bourse, where the index rose 1.53 per cent by noon.

The International Monetary Funds resident representative Shamsuddin Tareq said the IMF would disburse two delayed tranches, worth about $80 million each, of a stalled $600 million standby loan soon.

The head of a visiting IMF mission, Antonio Furtado, said if Pakistan kept to its targets, the standby loan could act as a bridge to a longer-term enhanced structural adjustment facility in fiscal 1997/98 (July-June).

The IMF mission said on Wednesday that it had approved the governments stabilisation measures and would recommend reactivation of the standby loan provided in December 1995 after Pakistan narrowly averted a foreign exchange crisis.

 

These policies under the standby are unusual in the sense that they include a lot of structural reforms already, Furtado said.

Pakistan concluded a three-year $1.5-billion ESAF with the IMF that began in February 1994, but payments were suspended a year later because Islamabad failed to achieve many targets.

The IMF withheld standby loan tranches due in June and September because of worries about Pakistans budget for 1996/97 and its continued failure to meet agreed targets.

The chief of the World Banks resident mission said in a statement that the bank would send a mission to Islamabad soon to help with banking sector reforms following the IMF accord.

Implementation of these reforms will lay the basis for the World Banks technical and financial support, he said.

Last weeks policy package included a 7.86 per cent devaluation of the rupee against the dollar, as well as spending cuts, new taxes and a 10 per cent rise in oil product prices.

Pakistans newly-appointed finance minister Naveed Qamar said IMF that the package meant there would be no need for further devaluation.

It should be recognised that the economic policy package that has been implemented included among other things a strong budgetary effort to reduce financial imbalances, he said.

This, combined with the deliberate overshooting of the latest exchange rate adjustment, obviates any need for further adjustment in the near future, Qamar declared.

He said Bhutto would make more changes in her economic team soon. State minister for finance Makhdoom Shahabuddin would be given a new portfolio and one or two other ministers might be added within the overall economic team in the next few days.

He indicated that this would not involve an expansion of the existing cabinet, but gave no details.

Qamar took over the finance portfolio on Monday from Bhutto, who had held it since her government took power in October 1993, and retained his previous post as privatisation minister.

Critics had argued that Bhutto lacked the expertise to run the finance ministry herself and should appoint a new economic team to try to restore Pakistans battered international image.

Qamar signalled that he would now take overall charge of economic policy-making. There shall be only one finance minister, he said, promising a new policy of consultation.

Our philosophy is now to be more open and open up overall the finance ministry and be more sensitive to the issues of the private sector and of trade, industry and agriculture.

I think it important that we get more input and that we involve them in the entire process, he said.