Pakistan Seeks Month Extension to Complete IMF Loan Program

  • Sept. 3-30 extension allows enough time for final review talks
  • Pakistan funding needs covered, repayment capacity ‘strong’

Pakistan’s government asked to extend a loan program from the International Monetary Fund as the Washington-based lender said it needed more time for administrative reasons to review the first program the country stands to complete after more than 10 tries.

Prime Minister Nawaz Sharif’s administration seeks an extension from Sept. 3 through Sept. 30 “to allow sufficient time to conduct final review discussions,” IMF staff said in a report published Tuesday. The remainder of the program fully covers Pakistan’s financing needs and the country’s capacity to repay the IMF “remains strong,” they wrote.

“That whole process takes a bit of time and that just wasn’t possible to do in the remaining few weeks,” Harald Finger, the IMF’s mission chief for Pakistan, said by phone from Washington. “Technically they have to request this, it’s the structure of the program, but I mean frankly this was something that was required for IMF internal administrative reasons.”

Sharif -- who’s in London recovering from open-heart surgery -- took a $6.6 billion loan from the IMF soon after taking office in 2013. The rupee and stocks have been among Asia’s best performers since then as growth picked up and deficits shrink, prompting Finance Minister Ishaq Dar to reiterate last month that Pakistan doesn’t need another IMF loan program.

However, the government has struggled to boost tax revenues and privatize state-run companies. Of the roughly $35 billion worth of debt maturing in the remainder of 2016 -- most of which is rupee-denominated -- about 80 percent of the total is due between July to September, according to data compiled by Bloomberg.

“While short term financing risks are limited, the materialization of risks to the economic outlook could erode Pakistan’s capacity to repay to the fund,” IMF staff wrote. “Still, the debt sustainability analysis shows that external debt would remain on a downward trend over the medium term under most stress scenarios.”

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