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Wednesday, April 24, 2013
IMF agrees to $5b loan facilityBy Sajid Chaudhry
ISLAMABAD: The caretaker government has reached a three-point understanding with the International Monetary Fund (IMF) for $5 billion Extended Finance Facility programme to ease up balance of payment difficulties that the new elected government might face in its honeymoon period.
Any additional financing needs could be met by the new elected government from friendly countries, World Bank and Asian Development Bank, as these institutions have indicated availability of sectoral financing facility as well. “It would be the prerogative of the new elected government in the Centre to decide whether or not it wants to avail this IMF loan programme,” Adviser to Prime Minister on Finance and Revenue Dr Shahid Amjad told reporters after returning to the country from Washington after attending the World Bank and IMF Spring meeting. Special Finance Secretary Rana Assad Amin was also present on the occasion.
Dr Amjad said that he would brief the prime minister and the federal cabinet on the understanding reached with the IMF, and within one week all political parties would be taken in to confidence in this regard so that whichever party forms the government after elections knows about the availability of this facility. He also indicated that in case the new government in Centre decides to go for the EFF IMF loan programme and additional financing from the World Bank and ADB, the government would be required to take some key measures like adjusting power tariff, expenditure management and levying new taxes or broadening of the tax base.
According to the third key understanding, the new elected government while taking such tough decisions would strengthen its social protection programme through cash transfers and targeted subsidies for poor so as to save them from impact of these measures. The rich of the country would bear the burden of all the fiscal and other measures to be implemented under the proposed IMF loan programme and poor would be protected through a social safety net to be designed by the new elected government, Dr Amjad explained.
The IMF is expected to hold talks with the new elected government in June, as these measures could form part of the federal budget 2013-14. Explaining the EFF loan programme facility, the adviser informed that the volume of the EFF facility could be equal to the repayment obligation of Pakistan to IMF of around $5 billion under the Stand-By-Arrangement loan programme. Explaining the significance of the EFF facility, Dr Amjad said that it is most suitable for the country as its repayment period would be eight to ten years against the three years repayment period under the Stand-By-Arrangement period.
He clarified that the caretaker government has not signed any loan programme nor has it the mandate to negotiate loan programmes. “During the spring meeting we had taken an opportunity to prepare groundwork for the new government,” he said, adding that the caretaker setup would handover the economy in a good shape to the new elected government and many steps are being taken to correct imbalances identified by the caretaker setup.
Dr Amjad noted that the attitude of IMF authorities with the Pakistani delegation was good and IMF authorities expressed their keen interest in engagement with the new elected government. He observed that despite balance of payment difficulties Pakistan would be able to meet all foreign repayment obligations.Courtesy www.dailytimes.com.pk