News / Economy

Pakistan Asks for New IMF Bailout Loan

A man fills a generator with petrol outside his shop during a power outage in Rawalpindi, Pakistan, June 3, 2013.
A man fills a generator with petrol outside his shop during a power outage in Rawalpindi, Pakistan, June 3, 2013.
Reuters
Pakistan asked for a new bailout loan from the International Monetary Fund on Thursday to boost its ailing economy, settling on an initial package of $5.3 billion following weeks of talks with a visiting IMF delegation.
 
The request marks a step forward for Pakistan's new Prime Minister Nawaz Sharif as he tries to find ways to fix the country's finances and show his commitment to restructuring its moribund economy.
 
But it also highlights a sense of urgency for Pakistan where the central bank has only about $6.25 billion left in reserves, enough to cover less than six weeks of imports.
 
“This is a Pakistan-designed program. It includes bringing the fiscal deficit to a more sustainable level,” Jeffrey Franks, the regional adviser to the Fund on Pakistan, told reporters. “The overall focus of the program is to boost economic growth so there is a better life for vulnerable Pakistanis.”
 
Lodging a loan request is the first step in a potentially long process that will involve Pakistan committing to reforms, particularly on broadening its narrow tax base and cutting subsidies, which lenders say benefit mainly the rich.
 
Pakistan had originally asked for a $7.2 billion program but settled on $5.3 billion after the talks. Speaking alongside Franks in Islamabad, Finance Minister Ishaq Dar said he hoped the IMF would raise its offer following further consultations with senior Fund officials in the United States.
 
Franks said he expected Pakistan to reach a budget deficit target of six percent of gross domestic product as part of the three-year bailout loan program, down from 8.8 percent of GDP in 2012-2013.
 
The country has already once averted a balance of payments crisis in 2008 after securing an $11 billion IMF loan package. But the IMF suspended the program in 2011 after economic and reform targets were missed.
 
Again, chronic gas and electricity shortages, violent crime and a Taliban insurgency have all hampered growth and contributed to falling foreign investment. The $230 billion economy grew 3.6 percent in the last fiscal year, below a target of 4.3 percent and well below growth rates of around nine percent seen 10 years ago.

Taking the reform path
 

Renewed anxiety over the nuclear-armed nation's struggling economy is one of the many challenges facing its new government.
 
With reserves shrinking by around $500 million a month and many Pakistanis angry over unemployment as well as high food prices and crippling power cuts, Sharif is keen to be seen as decisive and capable of overhauling the economy.
 
Unemployment is officially at 6.3 percent but is probably much higher.
 
The new government has already made some steps towards reforms and has set an ambitious deficit target of 6.3 percent of GDP for 2013/2014 although some analysts say it might be hard to meet.
 
It also plans a new energy policy to tackle power cuts, which frequently last 12 hours a day and have devastated the economy and fuelled unrest in parts of the country.
 
“We think Pakistan is committed to fixing its economic problems,” Franks said. “It is evident from the fact that policies are already under way.”
 
Islamabad already has a punishing schedule of repayments to the IMF from its previous loan agreement, which have put pressure on the rupee and raised concerns of a full-scale balance of payments crisis.
 
Conditions attached to a new IMF reform package could also prove unpopular, adding to concerns over stability at a time when Pakistan is already under pressure to contain a growing Islamist insurgency.
 
As the IMF wrapped up its talks in Islamabad, a suicide bomber rammed an explosives-ridden vehicle into a checkpoint in the volatile North Waziristan tribal region near the Afghan border, wounding three members of Pakistan's security forces.

You May Like

Video Protests Continue in Ferguson, Spread to Other US Cities

Missouri officials say deployment of more than 2,000 National Guard soldiers helps curb second night of rampant arson and looting in Midwestern town More

Video Ebola, Crackdown on Illegals Hit Business in Guangzhou

Chinese city has largest community of Africans in Asia More

Video Legendary Lebanese Actress, Singer Sabah Dies at 87

Music and film diva, affectionately called 'Sabbouha' by millions of her fans, performed at Carnegie Hall in New York, Royal Albert Hall in London, Olympia in Paris, Sydney Opera House in Sydney More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Aung San Suu Kyi: Myanmar Opposition to Keep Pushing for Constitutional Changei
X
November 24, 2014 10:09 PM
Myanmar opposition leader Aung San Suu Kyi says she and her supporters will continue pushing to amend a constitutional clause that bars her from running for president next year. VOA's Than Lwin Htun reports from the capital Naypyitaw in this report narrated by Colin Lovett.
Video

Video Aung San Suu Kyi: Myanmar Opposition to Keep Pushing for Constitutional Change

Myanmar opposition leader Aung San Suu Kyi says she and her supporters will continue pushing to amend a constitutional clause that bars her from running for president next year. VOA's Than Lwin Htun reports from the capital Naypyitaw in this report narrated by Colin Lovett.
Video

Video Mali Attempts to Shut Down Ebola Transmission Chain

Senegal and Nigeria were able to stop small Ebola outbreaks by closely monitoring those who had contact with the sick person and quickly isolating anyone with symptoms. Mali is now scrambling to do the same. VOA’s Anne Look reports from Mali on what the country is doing to shut down the chain of transmission.
Video

Video Ukraine Marks Anniversary of Deadly 1930s Famine

During a commemoration for millions who died of starvation in Ukraine in the early 1930s, President Petro Poroshenko lashed out at Soviet-era totalitarianism for causing the deaths and accused today’s Russian-backed rebels in the east of using similar tactics. VOA’s Daniel Shearf reports from Kyiv.
Video

Video Hong Kong Protests at a Crossroads

New public opinion polls in Hong Kong indicate declining support for pro-democracy demonstrations after weeks of street protests. VOA’s Bill Ide in Guangzhou and Pros Laput in Hong Kong spoke with protesters and observers about whether demonstrators have been too aggressive in pushing for change.
Video

Video US Immigration Relief Imminent for Mixed-Status Families

Tens of thousands of undocumented immigrants in the Washington, D.C., area may benefit from a controversial presidential order announced this week. It's not a path to citizenship, as some activists hoped. But it will allow more immigrants who arrived as children or who have citizen children, to avoid deportation and work legally. VOA's Victoria Macchi talks with one young man who benefited from an earlier presidential order, and whose parents may now benefit after years of living in fear.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.
Video

Video Tensions Build on Korean Peninsula Amid Military Drills

It has been another tense week on the Korean peninsula as Pyongyang threatened to again test nuclear weapons while the U.S. and South Korean forces held joint military exercises in a show of force. VOA’s Brian Padden reports from the Kunsan Air Base in South Korea.
Video

Video Mama Sarah Obama Honored at UN Women’s Entrepreneurship Day

President Barack Obama's step-grandmother is in the United States to raise money to build a $12 million school and hospital center in Kogelo, Kenya, the birthplace of the president's father, Barack Obama, Sr. She was honored for her decades of work to aid poor Kenyans at a Women's Entrepreneurship Day at the United Nations.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8016
JPY
USD
117.76
GBP
USD
0.6340
CAD
USD
1.1268
INR
USD
61.850

Rates may not be current.