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Navigation Primary Navigation Home Singapore Asia Pacific World Business Entertainment Sports Technology Top Stories Most Popular Secondary Navigation Singapore Asia Pacific World Search Search: Pakistan agrees to IMF credit of at least $7.6 bln Reuters - 56 minutes ago By Sahar Ahmed KARACHI, Nov 15 - Pakistan has agreed with the International Monetary Fund on a stand-by credit facility of at least $7.6 billion to stave off a balance of payments crisis, the country's top economic adviser said on Saturday. The international community is concerned that an economic meltdown in the nuclear-armed state could play into the hands of al Qaeda and allied Islamist militant groups seeking to destabilise the Muslim nation of 170 million. The eight-month-old civilian government is banking on good will towards Pakistan during its transition to democracy after more than eight years under former army chief Pervez Musharraf, who quit as president in August to avoid impeachment. World leaders were meeting in Washington at the weekend to discuss the worst global economic turmoil since the 1930s and consider reforms to world financial institutions such as the IMF. Shaukat Tarin, the recently appointed adviser to the prime minister, said the IMF had already agreed to lend to Pakistan under a 23 month programme, and the formalities should be concluded next week. "We are expecting it this month, he told a news conference in Karachi when asked when the first tranche might arrive. "We have requested IMF to give as much as they can." The interest rate on the credit facility would vary between 3.51 and 4.51 percent with changes according to market conditions, and would be payable between fiscal 2011/12 and 2015/16, Tarin said. Tarin said the IMF had offered access to a stand-by facility, for an amount as much as five times Pakistan's quota. "That comes to $7.6 billion," he said, adding that that was the minimum amount. A finance ministry official told Reuters on Friday that the government had asked for up to $9 billion. State Bank of Pakistan Governor Shamshad Akhtar said the IMF money would be used to build up the central bank's foreign currency reserves, which Tarin said be equivalent to more than three months import cover. The central bank's reserves stood at $3.5 billion on Nov. 8, equivalent to just nine weeks worth of imports, and Pakistan faced defaulting on international debt obligations in February next year unless it received a multi-billion dollar infusion. The rupee has lost 23 percent in value against the dollar since the start of the year, and foreign investors have fled a stock market which is down around 35 percent. Stocks would have fallen further but for an artificial floor authorities placed under the Karachi market's benchmark index at the end of August, and almost certainly will fall further once the floor is removed. FRIENDS IN THE WINGS Tarin said the IMF had endorsed Pakistan's own strategy to bring about structural adjustments needed to correct unsustainable current account and fiscal deficits. The strategy included reducing excessive government borrowing from the central bank to zero, and boosting the tax base, but did not involve a cut in defence spending, one of the heaviest items on the budget, Tarin said. The only point of difference with the IMF, according to Tarin, was the fund's desire to see higher interest rates; but a 200 basis point hike in State Bank's policy discount rate to 15 percent announced on Wednesday partially met those concerns. With headline inflation running above 25 percent and core inflation at 18.3 percent, real interest rates are still in negative territory. Tarin's statement came a day after Standard & Poor's cut its ratings on the nation's sovereign debt deeper into junk bond territory, eight rungs below investment grade. S&P highlighted Pakistan's tardiness in raising funds it badly needs to avoid defaulting on its debt liabilities. Pakistan had been in talks with the IMF for months, but officials had been coy about admitting they were seeking an IMF package, because of the harsh conditions the fund often imposes. Pakistan has tried to drum up help from other multilateral lenders and friendly governments, but they had wanted Pakistan to reach an accord with the IMF first in order to bring some discipline to economic management, analysts said. Other potential donors are gathering in Abu Dhabi on Monday for a "Friends of Pakistan" conference, but no funds are expected to be pledged at the officials-level meeting, though it could pave the way for a ministerial meeting later. Tarin told the Senate on Thursday he expected the World Bank and other lenders to step forward with several billion dollars of loans, and steadfast ally China to pitch in with $500 million. (Additional reporting Augustine Anthony; writing by Simon Cameron-Moore; Editing by Jeremy Laurence) Email Story IM Story Printable View Blog This Recommend this article Average (0 votes) Sign in to recommend this article » Most Recommended Stories » Related Articles: Business Pakistan agrees to IMF credit of at least $7.6 blnReuters - 56 minutes ago Europes faces more "difficult" qtrs- ECB's B-SmaghiReuters - 1 hour 44 minutes ago World leaders panned over handling of financial crisis - pollReuters - 2 hours 6 minutes ago Indonesia's Timah sees tin output flat in 2009Reuters - 2 hours 18 minutes ago G20 Leaders at economic summit eye detection planAP - Sunday, November 16 Most Popular – Business Viewed Bin Laden is isolated, focused on his own security: CIA Ancient 4,300-year-old pyramid discovered in Egypt Earth would be heading to a freeze without CO2 emissions Britney Spears's son hospitalized: statement Indian probe lands on moon, sends images View Complete List » Search: Home Singapore Asia Pacific World Business Entertainment Sports Technology Top Stories Most Popular

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