WASHINGTON, Sept 4 The International Monetary
Fund's board on Wednesday approved a $6.7 billion loan package
for Pakistan to help the South Asian nation revive its ailing
In a statement, the IMF said the three-year program should
help Pakistan rebuild its reserves and prevent a crisis in the
balance of payments. IMF loans generally come with conditions
for economic reform and should encourage other donors to step in
with more funds.
Two top finance ministry officials in Pakistan announced the
Fund's approval of a package in August, pending the board's
decision and Pakistan's progress on fiscal reforms.
The new loan will arrive just in time. As of August, the
central bank had only about $5 billion left in foreign currency
reserves, enough to cover less than five weeks of imports.
The Asian Development Bank, one of Pakistan's major lenders,
estimates that Pakistan needs $6 billion to $9 billion to meet
its obligations, including about $5 billion in outstanding debt
on an earlier $11 billion IMF loan package.
Pakistan averted a balance of payments crisis in 2008 by
securing the $11 billion IMF loan. This was suspended two years
ago after economic and reform targets were missed.
This time around, the government had to fulfill certain
conditions set by the IMF before the loan could be approved,
including slashing costly subsidies on electricity and sending
out notices to 10,000 delinquent taxpayers.
Pakistan has one of the lowest tax-to-GDP ratios in the
world. The IMF wants it to do more to tackle rampant tax evasion
by the wealthy elite.
Pakistan gets $540 million immediately, and the rest will be
disbursed after regular reviews of the program, the Fund said.
The IMF also said Pakistan should boost its tax-to-GDP ratio
by reducing special tax deductions and exemptions.
It praised Pakistan's reform efforts so far, but warned that
the road ahead would not be easy, given the country's dire
"Much effort is needed to boost confidence in order to
attract foreign direct investment in line with Pakistan's
long-term growth potential," it said.