LoC from IMF critical to economic prospects: visit scheduled for November 9-18

The International Monetary Fund (IMF) team will visit Pakistan from November 9 to 18 for Article IV consultations with Pakistani authorities. Sources told Business Recorder that the purpose of the visit would be to discuss recent economic developments, economic outlook and policies needed to strengthen the economy. Pakistan has not yet decided whether to go for a new programme loan under the Fund now or after a while.
Finance Secretary Dr Waqar Masood informed the Senate Standing Committee on Finance that even after the suspension of Stand-By Arrangement (SBA) programme Pakistan could go for a new loan program if and when the need arose. Sources said, "Pakistan, like any other member country, may make a loan request at a time of its choosing, which is unrelated to the timing of the Article IV consultations. Whether to put the request in front of the Fund during the coming visit of the Mission or to wait for some time in this regard depends upon the concerned authorities of the country".
According to Pakistan's repayment schedule to the Fund, it is clear that the country is scheduled to repay SDR 1.418 billion with an interest of SDR 100.24 million (SDR 1.518 billion in total) in the calendar year 2012, while repayments would increase by 38 percent in 2013 and reach SDRs 2.451 billion (SDR 2.399 billion as loan and SDR 52 million as interest). Sources said that the multilateral donors want a Letter of Comfort (LoC) from the IMF as a prerequisite for disbursing programme lending. "In case the country fails to get the LoC from the Fund, it might face more external and domestic debt, further increase in interest payments, decline in fiscal space, balance of payment crisis, and last but not least more rely on internal sources of borrowing like the State Bank of Pakistan would depreciate the currency while leading to high inflation", they added.