14:37 | 11/10/2018 Global Economy
Pakistan is seeking its largest loan package of up to US$8 billion from the International Monetary Fund (IMF) to bail itself out from a severe crisis that threatens to cripple its economy, diplomatic sources told Dawn.
The sources said that the IMF could place strict conditionalities, forcing Pakistan to seek additional loans for meeting those restrictions and this could expand the loan facility to US$12bn.
Pakistan began exploring the possibility of yet another loan package with the IMF while the PML-N was still in power and the exploratory talks continued under the interim government as well.
The final decision, however, was announced on Monday night when Finance Minister Asad Umar confirmed that the government was going to the IMF to bail Pakistan out of its foreign currency crisis.
The announcement followed the highest single-day loss in a decade in the stock market, which plunged by over 1,300 points, losing almost Rs270bn of its capitalisation.
On Tuesday, the IMF said that it would listen to Pakistan’s request for financial support “very, very attentively”, as it did with any member with good standing.
Pakistan has received more than a dozen financial support packages from the IMF in the past. It completed the last three-year package of US$6.4bn in August 2016, which was 216 percent of Pakistan’s quota at the IMF.
The previous program also aimed at “bringing down inflation and reducing the fiscal deficit to more sustainable levels”. It included measures to “help achieve higher and more inclusive growth, in particular through addressing bottlenecks in the energy sector”.
At a news briefing on Tuesday, IMF chief economist Maurice Obstfeld outlined the economic challenges that Pakistan was facing now and also commented on its ability to finance itself.
Asked how would the IMF react to Pakistan’s request for an emergency bailout package, he said: “As with any member in good standing, they are certainly entitled to request financial support from the Fund. So, we will be listening very, very attentively when and if they come to us.”
He noted that Pakistan has “frequently… had programs in the past several times… and that is a very good sign going forward”.