IMF Approves $7.6 Billion Loan For Pakistan

November 27, 2008 10:30 a.m. EST

Washington, D.C. (AHN) - The International Monetary Fund approved on Tuesday Pakistan's application for a $7.6 billion loan. The amount will be used by Islamabad to support its stabilization program and rebuild the Pakistani economy, while widening the country's social safety net to protect the poor.

The 23-month standby loan was initially resisted by the Pakistani government, which wanted more generous terms from bilateral donors. But the country's major allies - the U.S., China and Saudi Arabia - pressed the government to accept first the IMF loan and its conditions before they extend assistance to Pakistan.

President Asif Ali Zardari was seeking cash infusions with no conditions. But the potential donors are not giving in despite Zardari's pleas because of concerns over the country's weak economy and the rising political instability caused by Taliban rebels.

Islamabad would get an initial $3.1 billion while the remaining balance will be given after quarterly reviews, according to the IMF.

On Tuesday, the IMF forecast Pakistan will register a 3.4 percent rise in its gross domestic product for the current fiscal year, lower compared to the 5.8 percent the previous year. It predicts a decrease in the country's budget deficit to 4.2 percent of its gross domestic product from the 7.4 percent registered the past year.

Takatoshi Cato, IMF deputy managing director and acting chairman of the board which granted the loan, said, "The reduction will be achieved primarily by phasing out energy subsidies, better prioritizing development spending and implementing tax policy and tax administration reforms."