IMF emergency financing peanuts

[raych123]

KARACHI - Pakistan would only get a meager amount of 600 million dollars under IMF emergency financing programme in case the said loan package gets approved by the Fund authorities with a view to support domestic economy to meet its massive post-flood reconstruction costs and public spending in the affected areas of the country.
The anticipated emergency financial assistance form IMF to Pakistan will not be an appropriate option for the country under the given macroeconomic situation as the amount the country could obtain through this financing instrument will be much smaller against the severity of damage and losses caused by the disastrous floods in certain parts of all provinces. This concern is also evident from the statement of IMF representative who has estimated the reconstruction costs of this ongoing crisis to be run into billions of dollars.
It may be mentioned here that the assessment of economic losses, which is being done by World Bank and Asian Development Bank, have been estimated at $1.2b on initial basis. Sayem Ali, Economist at Standard Charted Bank while talking to media said, Pakistan’s economic team, headed by Finance Minister Abdul Hafeez Shaikh in a meeting being held with the IMF authorities at Washington should request for granting extended credit facility, an additional part of poverty reduction growth facility instead of looking for emergency financing keeping in view of economic prospect after devastators floods and to avert the emergence of expected balance of payment crisis in days ahead.
Pakistan’s officials are also negotiating with IMF staff over the release of two reaming tranches (around 3bn) of the $11 billion SBA loan program simultaneously.

The Executive Board of IMF can pledge for providing Special Drawing Rights of 370 million (about US$600 million) at 20 per cent SDR allocation quota limited for a member country under Emergency Financing program”, an economist said.
“However, under Extended Credit Facility or Poverty Reduction Growth Facility Pakistan could obtain about $6 billion loan for 2-3 years on long-term basis. This money could be spent on post-flood rehabilitation and reconstruction activities”, he added.
According to ECF, total access to concessional financing under the PRGT is limited to 100 per cent of quota per year, and 300 per cent of quota in total. These limits can be exceeded in exceptional circumstances. Access may be augmented during an arrangement if needed
It must be recalled here that Pakistan have had availed PRGF in past during the regime of Benazir Bhutto.
He disclosed that in 2005 earth quake, the country received $6.4 billion aid from the international community including financial institutions despite the fact that the extent of the destruction magnitude was much lower as compared to the recent floods damages.
It must be pointed out here that the IMF is discussing this week the implications for the budget and longer term growth targets and how the IMF can help Pakistan as part of an ongoing $11 billion loan program. The program began in late 2008 and loan installments are subject to a review by the IMF of Pakistan’s economic policies and performance, including the government’s budget deficit and making public finances more sustainable. The Fund will also discuss with Pakistani officials the need for emergency assistance.

RayChannel