IMF boosts loan to PAKISTAN by $3.2b

The International Monetary Fund said it had approved an additional
3.2 billion dollar loan to Pakistan after the country asked for more
help to weather the global economic crisis. The IMF said on Friday
the extra funds for the loan program to Pakistan would 'help the
country address increased balance of payment needs' and increase the
total loan to 11.3 billion dollars. The IMF executive board also
approved an extension of the loan to the end of 2010, an additional
three months, and the payment of a third instalment of the loan of
1.2 billion dollars, the multilateral institution said in a statement.
Four billion dollars had already been disbursed from the 7.6
billion dollar Stand-By Arrangement agreed in November to bolster the
South Asian nation amid the worst global contraction since the Great
Depression. Pakistan approached the IMF last year for a rescue
package as it grappled with a 30-year high inflation rate and
fast-depleting reserves that were barely enough to cover nine weeks
of import bills. The board decisions were made after IMF completed
its second review of the country's progress in addressing its
heightened balance of payments needs. 'The macroeconomic outlook
for 2009/10 remains difficult, and the external position is subject
to considerable downside risks,' said Murilo Portugal, IMF deputy
managing director, in the statement. The extra IMF aid 'will help
mitigate these risks and enable the implementation of the
government's fiscal program; however, this financing is temporary and
should be used as a bridge until the revenue reforms bear fruit.'
The board also agreed that part of the additional funding 'could be
used to finance priority spending until the disbursements of donor
support pledged for 2009-2010 are received.' IMF mission chief to
Pakistan, Adnan Mazarei, told reporters in a conference call that the
funds would help the government build the social safety net and
provide assistance to internally displaced persons in the
violence-riddled country. Mazarei said the funds were intended as
' bridge financing' until the Friends of Pakistan donors honour their
pledges from a Tokyo meeting in April, which he said was roughly $5.7
billion over two to three years. 'Here I must stress that because
IMF financing for the budget is temporary, it is very critical that
donors deliver their pledged support without any delay,' he added.
The IMF said the board had approved Pakistan' s request for waivers
for failing to meet certain criteria, including a budget deficit that
is 0.9 per cent of economic output and continued weakness in banking
supervision and tax policy. 'Pakistan's economy has continued to
stabilize, ' Portugal said. He welcomed Pakistan's progress in
reforms in the financial sector and the foreign exchange market and
in strengthening the social safety net. 'These achievements are
appreciable, considering the security developments that resulted
among others in the large number of internally displaced persons, the
global economic recession, and the difficult domestic political
environment,' Portugal said.