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October 31, 2008 16:01 IST
The IMF might approve a rescue package for financially crunched Pakistan by November 15, two days before a meeting of the 'Friends of Pakistan' group to help the country overcome the economic crisis.
International Monetary Fund and Pakistani officials concluded on Thursday negotiations in Dubai on a proposed macro-economic stabilisation programme for the country.
The talks, which began on October 21, focused on a policy framework for a possible rescue package for Pakistan.
Pakistan will now send a letter of intent and a memorandum of an economic and financial programme technical jargon for a formal request for help to the IMF in a week, the Dawn reported on Friday. After the request is received, the IMF will put it before its executive board, which is expected to take another week to reach a decision.
The IMF might approve the rescue package by November 15, two days before the meeting of the Friends of Pakistan forum, the report said.
The Friends of Pakistan, which includes the US, UN, European Union, UAE and China, was formed last month during President Asif Ali Zardari's visit to New York.
Prime Minister Yousuf Raza Gilani, currently in Turkey on an official visit, told reporters that Pakistan is discussing terms and conditions for an IMF package but he was hopeful that the country would not have to turn to the world body if it received aid from the Friends of Pakistan.
With its foreign exchange reserves dwindling rapidly, Pakistan needs to raise billions of dollars to meet foreign debt payments and to pay for imports. Pakistan has been reluctant to go to the IMF but experts now believe the country may have no other option. Pakistan also believes that IMF's endorsement will have a 'positive impact on its allies and encourage them to provide much-needed economic assistance,' the Dawn reported.
Under IMF rules, a country is allowed to receive 300 per cent of its quota, which in Pakistan's case amounts to about $4.5 billion.
But Pakistan has asked for four to six times of the quota between $6 billion and $9 billion to meet its immediate needs.
A source in the finance ministry told the Dawn that most of Pakistan's economic stabilisation plan had been agreed on in eight days of talks with the IMF in Dubai. A disagreement on one or two points was holding up the package, the source said.
Asked if the IMF was seeking a cut in the defence budget and a hike in the discount rate, the source said that these issues were of a sensitive nature and he would not like to discuss them.
The issues will be discussed in detail with the president and prime minister before a commitment is made. The IMF has in principle approved Pakistan's plan, the source said.
On Tuesday, visiting German Foreign Minister Frank Walter Steinmeier told reporters in Islamabad that Pakistan needed help in the next six days. Steinmeier said the IMF was willing to help the country but President Asif Ali Zardari said the country could 'ill afford' IMF's preconditions which would require a drastic reduction in government spending.
Pakistan is also seeking help from friendly countries like China and Saudi Arabia. It believes these traditional allies will overcome their reluctance and commit to help Pakistan at the Friends of Pakistan meeting in Dubai on November 17.
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