August 9, 2010 / 10:02 PM / in 7 years

UPDATE 1-Pakistan floods cause "major" harm to economy-IMF

* Flood will have implications for Pakistan budget

* Unclear how IMF program will be affected (Adds details, quotes)

By Lesley Wroughton

WASHINGTON, Aug 9 (Reuters) - Pakistan’s floods, the worst to hit the country in 80 years, will cause “major harm to the economy,” the International Monetary Fund said on Monday as donors’ and investors’ concerns grew over the disaster’s impact on an already fragile economy.

The floods “are very likely to cause major harm to the economy in terms of loss of output and budgetary consequences,” an IMF spokesman told Reuters. “In these circumstances, support from the international community will be critical.”

The spokesman did not say whether the economic impact could affect Pakistan’s $11.3 billion IMF program, but he said IMF officials were in touch with the authorities to assess the situation.

Pakistan turned to the IMF for emergency financing in November 2008 to avert a balance of payments crisis and shore up reserves.

While economic growth has picked up, Pakistan has struggled to meet some of the targets under the program, especially on increasing tax revenue to allowing for greater government spending.

The country was set to receive a disbursement of about $1.1 billion under the program following a performance review scheduled by the IMF this month.

The spokesman said IMF Managing Director Dominique Strauss-Kahn had told Pakistan President Asif Ali Zardari the fund stands ready to discuss how to help Pakistan manage the economic impact of the floods.

“Fund staff have been in touch with their Pakistani counterparts to assess the situation and discuss ways to help,” the spokesman added.

More than 1,600 people have died and about two million left homeless by the flooding, which began 10 days ago after heavy monsoon rains over the upper reaches of the Indus River basin wreaked havoc from northern Pakistan to the southern province of Sindh. For details, see [ID:nSGE67803O]

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