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Government does not feel additional IMF aid necessary

ISLAMABAD: The government has no intention to approach International Monetary Fund (IMF) for additional assistance because the Friends of Democratic Pakistan (FoDP) have pledged more than $5 billion, which seems sufficient to meet the country’s requirements.

Sources in the Economic Affairs Division (EAD) told Business Recorder here on Wednesday that the country was seeking $4 billion to $6 billion to make up for its budget deficit. “It is apprehended that the country might not be able to accumulate more than $4 billion from FoDP and, in that scenario, it would have been left with no option except going to IMF for additional assistance,” sources said.

The FoDP, led by the United States and Japan, has pledged more than $5 billion to stabilise Pakistan’s ailing economy and to fight the menace of terrorism. During the conference, America and Japan pledged $1 billion each. Saudi Arabia added $700 million and the EU $640 million.

Pakistan may get the programme loans to the tune of $3.5 billion for 2008-09 budget from the international donors. Out of this $3.5 billion, $800 million would be provided by the World Bank, while the Asian Development Bank (ADB) may provide $1.3 billion as external programme financing.

Pakistan has already received $5.668 billion foreign loans during nine months of the current fiscal year against the requirement of around $14 billion. An amount of $3.947 billion has been released by IMF so far–$3.1 billion as first tranche of the stand-by arrangement in November 2008, and $847 million on March 31 as the second tranche–out of $7.6 billion loan approved for Pakistan in November 2008.

The remaining $1.721 billion was received from other donors and ADB which occupies the leading position with $700 million contribution. The said loan disbursement also includes $500 million budgetary support from China and $500 million from World Bank.

According to the Letter of Intent (LoI) of IMF, fiscal deficit of Pakistan would be brought down to 4.2 percent of the GDP as against the budgetary target of 4.7 percent of the GDP for 2008-09. Moreover, the deficit would be further reduced to 3.3 percent of the GDP in next fiscal. Budget deficit was projected at Rs 582 billion at the time of announcement and later this projection was changed to Rs 562 billion for 2008-09.

Source: Business Recorder

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