* IMF board to consider tranche in late March
* Raises GDP growth forecast to 3.1 pct in 2013/14
* Economic situation very difficult but sees improvement
* Says central bank needs to be vigilant on inflation
* Eurobond issue on track - Fin Min
* May be followed by sukuk, depending on demand
(Adds quotes, details, background)
By Martin Dokoupil and Nadia Saleem
DUBAI, Feb 9 Pakistan appears to be on track to
receive a third loan tranche worth $550 million from the
International Monetary Fund later this year as the country goes
ahead with economic reforms, the IMF's mission chief to
Islamabad said on Sunday.
"The IMF mission...is encouraged by the overall progress
made in pushing ahead with policies to strengthen macroeconomic
stability and reviving economic growth," Jeffrey Franks told a
joint news conference with Pakistan's finance minister in Dubai.
He was speaking after consultations between the IMF and
Pakistan. They took place in Dubai because of security concerns
after 21 people, including the IMF's top representative in
neighbouring Afghanistan, were killed in a Kabul suicide attack
"The authorities' reform programme remains broadly on track
with the government meeting all of the quantitative performance
criteria by end-December 2013," Franks said.
He added that two exceptions were targets for the central
bank's net swap/forward positions and the ceiling on government
borrowing from the central bank, but that authorities had
reaffirmed their commitment to adopt corrective action.
The IMF's executive board is tentatively scheduled to
consider in late March whether Pakistan will obtain the third
tranche of its IMF loan programme, Franks said.
Last September, the IMF saved Pakistan from possible default
by agreeing to lend it $6.7 billion over three years. In return,
Pakistan must make good on reforms such as a longstanding
promise to privatise loss-making state companies. Franks said
the IMF was not imposing privatisation on Pakistan but was very
supportive of the process.
The IMF raised Pakistan's gross domestic product growth
forecast to 3.1 percent for the fiscal year 2013/14, which
started in July, from the previous prediction of 2.8 percent,
because of better performance in services and manufacturing.
Franks said Pakistan was still in a very difficult economic
situation but that the IMF saw signs of improvement as reforms
in the electricity sector seem to be bearing fruit, with
electricity shortages and unscheduled load-shedding declining.
Finance Minister Ishaq Dar described the country's economic
growth as "encouraging", adding that tax collection had risen 26
percent in January and that the IMF seemed to be more or less
satisfied with the central bank's net asset reserves.
Decisive efforts to broaden the tax net through elimination
of tax exemptions and loopholes granted through statutory
regulatory orders are critical to the future of Pakistan's
economy, the IMF also said.
The IMF and Pakistan differ on inflation expectations, with
the Fund projecting a 10 percent rate in the current fiscal
year. Dar said: "Based on the moderate rate of inflation of 7.9
percent during January 2014, we expect that inflation for the
entire fiscal year would remain within a single digit."
The Washington-based body encouraged Pakistan's central bank
to be vigilant in coming months to guard against a rebound of
inflation. It would like to see price growth in a 6-7 percent
range on a sustainable basis, Franks said.
Pakistan is "well on track" in the process of issuing a
eurobond, and expects the process to be completed by the end of
March, Dar said.
He told reporters that he did not expect the cost of the
issue to be over 6 percent, and that it should be around the
"usual" benchmark price.
"There is a huge demand for this bond and it may be followed
by an Islamic bond or sukuk. I'm not sure because it depends on
the interest - but so far we are very positive."
Bankers not involved in the transaction told IFR, a Thomson
Reuters service, last month that Pakistan had mandated a U.S.
dollar bond offer to take place sometime in the first quarter.
(Editing by Andrew Torchia)