IMF's $5.8b bailout to help fix Pakistan's energy crisis

Little choice: New Pakistan PM Nawaz Sharif. Photo: Reuters

London: The International Monetary Fund and Pakistan have reached a provisional agreement on a $US5.3 billion ($5.8 billion) bailout package.

The package is expected to soothe Western fears about the state of Pakistan's economy, which has slumped in recent years amid unrelenting Taliban violence and deeply rooted corruption.

The IMF package would also provide a tangible lift for the newly elected Prime Minister Nawaz Sharif, who has already become bogged down by a seemingly intractable energy crisis.

The IMF has an unhappy history with Pakistanis, some of whom are likely to see the package negatively.

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The last government failed to meet the terms of the previous IMF package six years ago, and the country is still struggling to repay billions of dollars of that debt.

Moreover, Mr Sharif's government is ideologically hostile towards international aid, and campaigned on a platform of economic autonomy.

Analysts say his government had little choice but to accept Thursday's deal.

The package will be used in part to service the existing IMF debt, but also to create confidence and alleviate the severe energy crisis, which has resulted in crippling power cuts across the country, even in the capital, Islamabad, in recent months.

''It was a necessary thing,'' said Sakib Sherani, an economist who advised the last government. ''Everyone's been on tenterhooks about the balance of payments crisis, and a possible run on the rupee.

''At least this will provide some stability so the new government can work on implementing its own agenda.''

The $5.3 billion loan is subject to approval by the IMF executive board, which is scheduled to meet in early September. If the loan proceeds, it will carry an interest rate of about 3 per cent and be disbursed over three years, said Jeffrey Franks, head of the visiting IMF mission to Pakistan.

Pakistani Finance Minister Ishaq Dar denied that his government had reneged on its election pledges of economic independence.

''We are entering into a new program for the good of the country,'' he said. ''A better tomorrow dawns only when requisite pains are borne today.''

Mr Franks acknowledged Pakistan's failure to repay previous loans from his institution. But Mr Sharif's government will not be punished for the sins of its predecessors, he said.

''We're not going to turn a country down because previous governments did not do what they had promised to do,'' Mr Franks said.

New York Times

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