Pakistan to Forfeit IMF Loan

[Ali Ahmad Syed]

Pakistan to Forfeit IMF Loan

Government decides to forfeit last tranche of IMF loan, plans to pursue ‘homegrown reform program’ instead.

AFP | Posted on Nov. 1, 2011.

Pakistan will not take up the final $3.7 billion tranche of an International Monetary Fund loan package after rejecting strict reform demands‚ the Financial Times reported on Nov. 1.

Finance Minister Abdul Hafeez Shaikh told the daily that the IMF conditions were too tough and the government would instead pursue a homegrown reform program‚ adding that the “resilient” economy did not need IMF help.

The Washington-based fund bailed out Pakistan with an $11.3 billion loan package in November 2008 as the country faced 30-year-high inflation rates and fast-depleting reserves‚ as well as a deadly insurgency.

But the IMF earlier this year indicated it was unsatisfied with Islamabad’s progress in dealing with its chronic fiscal problems and introducing promised structural reforms.

“Inflation remains persistently high‚ and budgetary problems are undermining macroeconomic stability‚” it said in May, 2011.

An IMF spokesman declined to comment on the Financial Times report, but said that the standby facility had expired per schedule on Sept. 30.

The fund has paid out two-thirds of the loan package‚ with the latest installment disbursed in May 2010.

Three months later the country was hit by the worst floods in its history‚ which led to a separate emergency aid payment of $450 million. Since then‚ however‚ the IMF and Pakistan have been at odds over fiscal management.

The IMF forecasts Pakistan to post growth of just 2.6 percent in 2011‚ among the lowest in Asia, while inflation is tipped to stand at around 14 percent this year and next–among the highest in the world.

Pakistan to Forfeit IMF Loan