IMF sends team to Pakistan to discuss emergency loan package

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The director of the International Monetary Fund (IMF) said she would send a team to Pakistan in the coming weeks after the government requested emergency rescue loans.

IMF Managing Director Christine Lagarde made the statement on October 11 after meeting Pakistani Finance Minister Asad Umar and Central Bank Governor Tarik Bajwa on the sidelines of a conference in Indonesia.

“During the meeting, they asked for financial assistance from the IMF to help tackle Pakistan’s economic challenges,” Lagarde said. “An IMF team will travel to Islamabad in the coming weeks to begin discussions on a possible IMF-supported economic program. We look forward to the continuation of our partnership.

If a package is agreed, it would be the 13th IMF bailout since 1988. The fund recently loaned $ 6.7 billion to Islamabad in 2013.

Pakistani Prime Minister Imran Khan said earlier this week that he would seek aid of around $ 12 billion from the IMF and “friendly countries” such as China and Saudi Arabia to deal with a crisis of the rapidly worsening balance of payments.

The announcement prompted opposition lawmakers in Islamabad to stage a sit-in outside parliament on October 11 to protest the move.

Beijing and Riyadh are already heavily invested in transport and energy projects in Pakistan, which is one of the biggest borrowers from China’s Silk Belt and Road initiative.

China has pledged more than $ 60 billion in loans and investments to build a transportation network from western China through Pakistan to the Indian Ocean, but Pakistan has failed not disclosed details of the loans he received.

The United States, which wields considerable influence over the IMF, has criticized China’s infrastructure loans, warning that it has burdened some developing countries with debts they cannot afford to repay.

US Secretary of State Mike Pompeo said there would be “no justification” for an IMF bailout of Pakistan, which is mainly used to refinance and repay Islamabad’s debts to China.

Apparently, with this objection in mind, Lagarde said that in considering further loans to Pakistan, the IMF “would need to have full understanding and absolute transparency on the nature, size and terms of the loan. debt that weighs on a particular country. “

The Pakistani currency plunged around 7% earlier this week after news of the loan request became public. The 26% drop in the currency’s value since last year has pushed up commodity prices, angering many Pakistanis.

Khan, when he took office, promised to cut borrowing in light of the heavy borrowing from the previous government. But he said this week that a looming financial crisis – with the country barely having enough foreign exchange reserves to pay its debts – has forced him to seek further aid.

Any loan deal reached with the IMF could involve restructuring part of Pakistan’s external debt, a Pakistani minister told Reuters.

“This is at a very early stage, the negotiations have not yet started or matured, but it is something we can look to,” said Muhammad Hammad Azhar, Minister of State for Revenue.

Critics have warned Pakistan that its budget deficit, which reached 6.6% of economic output last year, was unsustainable.

“We have extremely high deficits,” Azhar told Reuters. “Unless we restructure the debt, the burden will increase.”

With reports from AP, AFP and Reuters

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