Govt wants to defer IMF repayments

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ISLAMABAD: Amid assurance from the United States for disbursement of $600 million shortly, Pakistan is seeking to defer repayments to the International Monetary Fund (IMF) for the current fiscal year.During a meeting here on Thursday, US Ambassador to Pakistan Richard Olson and Senior Adviser to US Special Representative for Afghanistan and Pakistan Robin Raphel told Finance Minister Dr Abdul Hafeez Shaikh that the “Coalition Support Fund amounting to $600m will be released without delay”.

The US would also launch $80m investment fund for Pakistan’s small and medium enterprise sector in January 2013, provide $200m for Diamer-Bhasha dam, and encourage Overseas Private Investment Corporation to participate in the country’s development and support projects of up to $1 billion.

A finance ministry official said senior government functionaries took up the issue of deferred repayments with the IMF during a recent visit to the US. He said an IMF team was likely to visit Islamabad this month to discuss the repayment schedule.

The option to seek a temporary moratorium on repayments was being contemplated because of declining exchange rate, caused by depletion of foreign exchange reserves.

Answering a question, he said that since the IMF rules did not allow rescheduling of its loans and a new IMF programme could not be negotiated by an outgoing government in the absence of an existing one, the only option left was to delay certain repayments becoming due between now and the end of fiscal year, on June 30.

Pakistan has to repay about $1.7bn during the current financial year. A major repayment of $1.1bn is becoming due in February, in addition to a minor repayment during the current month and another one, of $500m, in May. The official said Pakistan had requested the IMF to allow deferment of a couple of repayments which would become due during the period of transition from the current government to the interim government and then on to the next government.

He said the expected disbursement of about $600m by the US over the next couple of weeks would strengthen Pakistan’s foreign exchange reserves and ease the balance of payment position for some time but there was a need to consolidate the position further through deferment of a few repayments.

This had become vital because of slow progress on auction of the third generation of telecom licences which was to result in proceeds of over $1bn during the year. Slippages on tax collection and higher energy sector subsidies were anticipated to increase fiscal deficit during the year.

The country’s total foreign exchange reserves, which currently stand at about $13.5bn, have been under pressure in recent weeks, causing a continuous slide in exchange rate. Excluding $4.2bn held by private banks, the total reserves with the central bank have already declined by about $9.2bn.

The government feels that a further decline in the reserves could lead to panic in the market, encouraging market players to take advantage of the situation. Pakistan’s creditors have advised the government to seek IMF support before a full-blown



Courtesy: Dawn

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