The finance ministry of Pakistan said that adequate foreign-exchange reserves are available and the government would not go for a new loan from International Monetary Fund (IMF) after the expiry of current program on 30 September, 2011.
The Finance Secretary Mr. Waqar Masood Khan said that “At present we do not need a new loan program and country’s FX reserves are at adequate level, while exports and remittances are chief source fiscal strength this year”. The IMF suspended funds disbursements to Pakistan in May 2010, as GoP failed to meet requirements and conditions attached with $11.3 billion loan. The IMF aid was obtained by Pakistan since the end of 2008 as terrorism and floods affected economic growth and government’s budget.
Financial experts have shown their reservations regarding the slow pace of economic growth; significant pressure is expected to appear on reserves when repayment of this big debt will start next year. These reserves are expected to go back as repayment to IMF in year 2013.
Pakistani currency touched to the lowest level on Sept 16 and further drop is also expected in this month. The rupee has reached to the level of 87.70 to the dollar.
Pakistan government would have to pay Rs 243 billion ($2.8 bln) for foreign debt in the fiscal year ending on june 30, 2012. The FX reserves had declined to the level of $17.8 billion in September, 2011 from $18.3 billion in July, 2011. The Government of Pakistan has asked IMF to provide bail out funding in Dec 2008, when FX reserves reached to the dangerously low level of $3.45 billion (decreased by 75%). In December 2010, IMF had extended time line for the implementation of sales tax and reduction in budget deficit.
Pakistani government is required to meet the terms and conditions agreed with IMF, including the policy of zero borrowing from State Bank of Pakistan. This will help in controlling the inflation to a reasonable level. Pakistani Prime Minister and his delegation pledged to narrow the budget gap to a seven-year low of 4% GDP in the year ending June 30, 2012.