The International Monetary Fund announced Friday that it will release $1.13 billion aid package for Pakistan despite country’s failure to meet conditions specified in loan agreement.
Pakistan had requested for a waiver for its inability to meet quarterly budget deficit target and net government borrowing limits from the State Bank of Pakistan.
Murilo Portugal, IMF’s deputy managing director and acting chairman said, “preparations for important and politically difficult tax reforms have moved forward, and there has been steady progress in financial sector reform”.
IMF has approved total of $10.66 billion loan for Pakistan and with the release of $1.13 billion it has disbursed $7.27 billion so far. IMF has also accepted Pakistan’s request to merge the remaining three payment instalments into two. The IMF said Pakistan has missed two conditions because of the delay in getting pledged aid from other nations.
Portugal said, “Pakistan’s vulnerabilities remain high, due to persistent inflation, security-related spending pressures, energy-sector problems and shortfalls in revenue collection and external financing”.
United States is exerting pressure on Pakistan to send troops to North Waziristan to fight Taliban who claimed responsibility for the recent failed bombing attempt in New York. The IMF announced its readiness to adjust Pakistan’s budget deficit and borrowing targets to let Pakistan manage necessary funding for such priority programs as security.
Portugal said, “these challenges highlight the importance of pursuing a credible fiscal consolidation, maintaining a flexible exchange rate and a cautious stance to monetary policy, and improving governance”.
IMF accepted Pakistan’s request to increase the end-June 2010 budget ceiling by 0.15 percent of gross domestic product, and the floor for net foreign assets of the State Bank of Pakistan was raised by $300 million.