IMF approves $7.6 billion rescue fund for Pakistan

by Sanjay Jha | November 24, 2008 at 10:54 pm

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After succesfully lobbying from the International Monetary Fund for help, Pakistan have manged to get a help of US $7.6 billion from International Monetary Fund in order to avoid defaulting on international debt and skirt a financial crisis brought on by high fuel prices, dwindling foreign investment and soaring militant violence.

Aid from the agency often comes with conditions such as cutting public spending that can affect programs for the poor, making it a politically tough choice for governments. It is yet to be known under what conditions Pakistan has taken the aid.

Upon the approval of the IMF's Executive Board, an amount equivalent to $3.1 billion becomes immediately available to Pakistan, and the remaining amount will be phased in, subject to quarterly reviews in a 23-month stand-by arrangement under which the to tal amount of resources made available equal 500 per cent of the country's quota.

The arrangement was approved by the Board under the Fund's fast-track Emergency Financing Mechanism procedures.

The IMF-supported programme aims to achieve the key objectives of restoring macroeconomic stability and confidence through a tightening of macroeconomic policies and to ensure social stability and adequate support for the poor and vulnerable in Pakistan, the Fund said in a statement.

“The programme targets a significant reduction in fiscal deficit, aimed at eliminating State Bank of Pakistan financing of the government and reducing the external current account deficit, while allowing for increased social and development spending,''