IMF Agrees to $450 Million in Emergency Financing for Pakistan
Pakistan to Get $450 Million Emergency Loan From IMF
Adek Berry/AFP/Getty Images
Internally displaced Pakistanis wade through flood water as they return to their homes in Shikarpur.
Internally displaced Pakistanis wade through flood water as they return to their homes in Shikarpur. Photographer: Adek Berry/AFP/Getty Images
Pakistan will receive $450 million in emergency financing from the International Monetary Fund to help the country rebuild an economy ravaged by record flooding, said Dominique Strauss-Kahn, the fund’s managing director.
In a statement today in Washington, Strauss-Kahn said he will ask the IMF board to make the loan available this month. He also told reporters that talks are continuing to “reorganize” a previously approved loan, unrelated to the disaster, that was frozen.
The worst deluge in Pakistan’s history threatens to cripple the economy with a surge in unemployment, an increase in inflation and damage to billions of dollars in infrastructure, Pakistan Prime Minister Yousuf Raza Gilani said this week in a speech in Islamabad.
The disaster will have “an important effect on the country’s economy as it has caused serious damage to infrastructure, severely impacted economic outlook and resulted in a worsening of the fiscal situation,” Strauss-Kahn said in the statement.
The emergency aid will come under the “Natural Disaster Assistance” program, the fund said. Such financing comes with an interest rate of 1.29 percent and an additional service charge of 0.5 percent a year, and terms range from about three to five years, according to the IMF’s website.
Disbursement Pace
“I’m happy to note that unlike a lot of pledges which are made in these kind of situations and take a long time to materialize, the IMF emergency assistance will be committed formally and can be disbursed within a couple of weeks or so,” Abdul Hafeez Shaikh, Pakistan’s finance minister, told reporters today in Washington
A mandatory review of Pakistan’s policies planned for June had been pushed back, blocking a disbursement under an $11.3 billion loan that was approved two years ago, as the country failed to contain spending and fell behind in implementing a sales tax.
“Our dialogue with Pakistan on the current stand-by arrangement is progressing and the authorities have expressed their intention to implement measures for the completion of the fifth review of the program later this year,” Strauss-Kahn said. “We will stay in close contact as these efforts proceed.”
Completing the review will allow the fund to disburse $1.7 billion, bringing total IMF disbursements including emergency assistance to $2.2 billion for Pakistan in the second half of 2010, the IMF chief said.
Price Surge
Pakistan’s inflation rate may almost double to 20 percent after the floods destroyed crops, roads and bridges, the country’s prime minister said. The government also estimates that $1 billion of crops may have been damaged.
“I want to reaffirm the commitment of the government of Pakistan towards the economic reform program, which includes fiscal austerity” and other measures, Shaikh said. He called the floods “perhaps the greatest calamity to have ever struck any country in recent times.”
The World Bank yesterday increased its flood-related support to the nation to $1 billion from $900 million, the Washington-based development lender said in a statement on its website.
About 17.2 million people have lost homes and livelihoods to monthlong floods that have killed more than 1,500 people, the United Nation’s Office for the Coordination of Humanitarian Affairs has said.
To contact the reporter on this story: Sandrine Rastello in Washington at srastello@bloomberg.net;
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