News
Monday, August 18, 2008
IMF asks Pakistan to cut spending
* IMF director for ME and Central Asia says country won’t need loan until June 2009 if it ends fuel subsidies by December
KARACHI: Pakistan does not need to turn to the International Monetary Fund (IMF) for money in the next 10 months if the government cuts spending and gets other sources of funding to offset falling reserves, a senior IMF official said. Mohsin Khan, IMF’s director for the Middle East and Central Asia, said Pakistan had not asked the IMF for loans. Steps to avoid loans: Khan said Pakistan would not need an IMF loan in the fiscal year to June if the government abolishes all fuel subsidies by December as planned, and stops borrowing from the State Bank of Pakistan (SBP) to pay for its budget deficit. He said the government needs to stick to its privatisation plans to raise money, secure over $1 billion worth of loans from the World Bank and Asian Development Bank, and get Saudi Arabia to defer an estimated $5.9 billion worth of oil payments. “If things fall right for them in all these things that they are planning to do, I don’t believe there will be any need for them to come to the IMF,” Khan said in a phone interview. “Unless there is a total collapse of foreign direct investments, they can ride this out,” he said. He added that it is the responsibility of the SBP to boost reserves. “You must build up your reserves back to where they were a year ago,” he said. Khan said the SBP should ensure any future loans Pakistan receives will add to reserves, and that it should ask commercial banks to raise deposit rates by at least two percent to attract more money from investors. reuters
Courtesy DailyTimes