Pakistan may seek more IMF loan to clear debt
By Razi Syed
KARACHI: Pakistan is likely to go to the International Monetary Fund (IMF) in fresh fiscal year 2012-13 to seek loan for the retirement of IMF’s Stand-by Arrangement (SBA) facility, sources in the Ministry of Finance said on Tuesday.
The country will have to pay more than $7.82 billion in four different instalments from 2011-12 to 2014-15, sources said.
Pressure on foreign exchange reserves is also affecting the overall economy of the country.
State Bank of Pakistan Governor Yaseen Anwar on Tuesday said printing of currency by the government to meet expenditures besides heavy borrowing amounting to Rs 442 billion from central bank till May 2012 has also affected the country’s economic condition.
He however, said that the central bank was capable to make payments of IMF instalments, but downward trend in forex receipts would make the repayment of loans instalments difficult.
Pakistan has to pay $3.4 billion in 2012-13, $3.43 billion in 2013-14 and $1.35 billion in 20114-15 to retire IMF outstanding loans, said a foreign currency expert in Texas USA Fazal Ahmad.
Talking to Daily Times, he said Pakistan would possibility face a 3-5 percent increase in value of IMF loans repayment due to dollar-rupee parity in the next three to four years.
The country’s foreign exchange reserves will continue to face pressure due to payment of IMF loans in the next more than three years, he added.
The economy of the country has been badly hit by huge government borrowing, power and gas crisis and uncertain political and law and order situation.
The IMF is still pressurising Pakistan to initiate economic reforms to tackle challenges the country is facing.
However, the government is still unable to implement key benchmarks agreed with the IMF, bringing the central bank’s borrowing to a desired limit, enforcing general sales tax (GST) on goods and services in integrated mode, eliminating power sector subsidies and keeping the budget deficit within the agreed limits.
The move by Pakistan government to choose short-term gains over long-term economic stability is risky.
The IMF wants Pakistan to raise tax revenue from the present 10 percent of gross domestic product (GDP) to 15 percent of GDP by 2013, which is peril for the economy.
The burden of subsidies along with higher security-related expenditures exerted continuing pressure on the fiscal system and adjustment path was affected.
The government failed to focus on growth-oriented policy for reducing unemployment in the country besides borrowing that should be reduced in order to bring down the interest rate.
The IMF is not happy over the performance of Pakistan government as the government failed to lessen Rs 1 trillion financial deficit besides provided power subsidy of Rs 295 billion, which annoyed the donors.
The fund also put a proposal before Pakistan that surplus cash crops would be kept under the IMF supervision, he added.
There is a compulsive need for reorientation of fiscal approach from external assistance to boosting of agricultural and industrial production, which has unfortunately remained static for years now, he added.
During the first 10 months of FY 2011-12, remittances from overseas Pakistanis rose by 20.2 percent to $10.877 billion, which helped balance of payments despite widening of trade deficit.
During the current fiscal year until May 18, 2012, Pakistan has made debt payments amounting to $2.53 billion (inclusive of $809 million to IMF) and other miscellaneous payments of $1.52 billion, while receipts from multilaterals and others amounted to $1.21 billion.
Daily Times - Leading News Resource of Pakistan
Without reforms all the loans/aid/donations will go in the black hole