The International Monetary Fund on Wednesday approved a $6.7 billion loan to Pakistan, despite skepticism about the country's ability to implement urgently needed economic reforms.
The Executive Board of the IMF approved a three-year arrangement, Extended Fund Facility (EFF), which will provide a breathing space to Pakistan as it will return the loan over a period of ten years.
Pakistan will immediately receive $540 million of the total amount, which will partially address its debt obligations as the country is scheduled to return over $6 billion to international lenders this year, including over $3 billion to the IMF alone.
The remaining amount will be evenly paid out over the duration of the program, subject to completion of quarterly reviews, said the IMF.
The conditions highlight the tough path ahead for the new government of Prime Minister Nawaz Sharif, that has been obligated to implement tight fiscal and monetary policies, which may hurt some growth prospects.
Among other strong conditions attached with the loan include privatising loss making entities. The government is thus expected to revert to the Council of Common Interests with a list of approximately 71 enterprises that it intends to privatise.
On the other hand, the IMF programme may pave the way for winning loans from other international lenders.
“Despite the challenges it faces, Pakistan is a country with abundant potential, given its geographical location and its rich human and natural resources,” the IMF said.
“The authorities’ program is expected to help the economy rebound, forestall a balance of payments crisis and rebuild reserves, reduce the fiscal deficit, and undertake comprehensive structural reforms to boost investment and growth.”BLOG COMMENTS POWERED BY DISQUS