IMF keeps Pak. on tenterhooks

By B. Muralidhar Reddy

ISLAMABAD, APRIL 1. The International Monetary Fund (IMF) has approved the second tranche of $133 millions standby loan for Pakistan while keeping the military government on tenterhooks about providing $3.5 billion poverty reduction grant facility (PRGF). A meeting of the IMF Board in Washington on Friday agreed to approve the second tranche after a review of the economic performance of Pakistan in the light of the understanding arrived at with the international agency in November this year.

The military government has been under microscope of the IMF for the several months and it was forced several measures considered harsh on the domestic front in line with the policies prescribed by the Fund.

Decision of the IMF to provide a standby loan in November last year came as a great relief to the Musharraf Government as without the arrangement there was a serious danger of Pakistan defaulting on its debt obligations.

There was a furious debate within the country on the options before the Government given the precarious foreign exchange position and the huge external debt that stood at $37 billions in early 2001.

Pakistan requires nearly $5 billions just to service its debts while its export earnings are below $9 billions. The foreign exchange reserves of the country particularly in the second half of 2000 had dipped to dangerously low level.

This was the backdrop against the bailout loan approved by the IMF in November provided the much-needed relief to the military regime. Though the loan approved by the IMF was insignificant, it was essentially seen as a signal to the other international lending agencies to go ahead with their own schemes for Pakistan. The IMF is supposed to have created the `right environment' to the other lending agencies by making the military government commit on a full-fledged economic policy statement. It was as per this programme that the Pakistan Government has been forced to resort to increase all the utility services in the country.

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Section  : International
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