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Central & South Asia
Pakistan turns to IMF for help
Government may ask International Monetary Fund to loosen its existing $10 billion loan.
Last Modified: 24 Aug 2010 08:20 GMT
Foreign minister Shah Mehmood Qureshi has said Pakistan will have to 'revisit' its budget

Pakistani officials will reportedly press the International Monetary Fund (IMF) to loosen the terms of a $10 billion loan in an effort to cope with the worst floods in the country's history.

The two sides met in Washington DC on Monday, where they were set to discuss the flooding and the scheduled release of the final instalment of a $10.66 billion loan extended by the IMF in 2008.

"Pakistan will seek a revision of conditionalities on the existing [loan] and might also look at the possibility of further borrowing," Farahnaz Ispahani, a spokesman for president Asif Ali Zardari, told the Telegraph newspaper on Sunday.

Zardari himself said on Monday that the disaster would have a "major and lasting" impact on Pakistan's economy.

He added that recovering from the floods would take at least three years.

The IMF has said the floods will present "a massive economic challenge" to Pakistan and that it will look at ways it can assist.

"The IMF stands with Pakistan at this difficult time and will do its part to help the country," the organisation said in a statement on Saturday.

Economic impact

Because of the floods, Pakistan fears it might not be able to meet inflation and deficit targets set by the IMF as part of the fund's loan package.

SPECIAL COVERAGE

Various estimates put the country's economic growth this year at anywhere from zero to 3 per cent, less than the government's target of 4.5 per cent, according to the Reuters news agency.

The fiscal deficit is also predicted to expand to more than 8 per cent of gross domestic product.

Pakistan's agricultural sector has been particularly hard hit.

The floods have destroyed or severely damaged more than 1.7 million hectares of crops, around 18 per cent of the country's cultivable land, Nazar Muhammad Gondal, Pakistan's minister of food and agriculture, told Reuters on Monday.

'Not sustainable'

International donors have pledged more than $800 millionto help Pakistan deal with the floods, which have killed around 1,500 people and made six million homeless over the past three and a half weeks.

The government is under pressure to respond but will have to engage in creative financing amidst Pakistan's troubled economy.

Shah Mehmood Qureshi, the foreign minister, said in New York City on Thursday that the government would "revisit" its budget and expected to cut spending while diverting to flood recovery some of the $7.74 billion allocated to development projects.

"Either the [IMF] steps forward and allows plenty of relaxations on the current programme or we make a fresh start and discuss a new programme with performance criteria that are tailored to our new economic realities," a Pakistani official told the Financial Times newspaper last week.

"The present program is not looking sustainable."

Source:
Al Jazeera and agencies
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