15 November 2001 Thursday 28 Shaban 1422
Creditors to bridge $3.2bn financing gap
By Our Staff Reporter
ISLAMABAD, Nov 14: Pakistan's $3.2 billion financing gap for 2001-2002 will be jointly bridged by the IMF-led bilateral and multilateral creditors and a decision in this respect is expected to be taken by the Fund's executive board in the first week of December.
Pakistan has been assured by the United States that its $8 billion financing gap during the next three year period will be met by bilateral and multilateral donors, official sources told Dawn here on Wednesday.
Pakistan was told that since it offered necessary support to US-led coalition to fight against terrorism, Islamabad's short- and long-term financial requirements will be adequately met. And in the first place, Pakistan's current year $3.2 billion financing gap will be filled to ease pressure on its balance of payment position.
The IMF's new Senior Representative in Pakistan Mr Henri Ghesquiere, when contacted, confirmed to Dawn that Fund's executive board was meeting in Washington on Dec 5 or 6 to discuss and approve Pakistan's estimated $3.2 billion financing gap for the current financial year.
"Pakistan's economic and financial needs are required to be met and its case for approval of $3.2 billion financing gap for the current fiscal is bright," he said.
He pointed out that IMF and other bilateral and multilateral donors were greatly encouraged by the successful completion of the 10-month Standby Arrangement (SBA). "The executive board of the IMF has been encouraged to see good economic performance shown by Pakistan under SBA programme," he added.
"Pakistan has a good argument for trying to persuade the creditors for a certain extent of debt forgiveness."
Mr Ghesquiere said that Poverty Reduction Growth Facility (PRGF) will also come up for discussion by the board. However, he made it clear that nothing could be said about the size of the new lending programme. But he said that new lending programme will be concessional one to help improve the economy of the country. Pakistan, he said, was so indebted that it needed to be offered new loans on maximum 0.5 per cent interest rate.
Official sources said that $3.2 billion financing gap was likely to include $700 million loans to be restructured by the Paris Club for the current financial year.
The Club was expected to meet immediately after IMF executive board's meeting.
Sources said that while the IMF, Paris Club and other bilateral and multilateral donors were working out details to offer substantial assistance to Pakistan, they wanted improvements in various sectors. For example, they were of the view that issues like corruption, good governance, transparency and provisions for more funding for health and education sectors were needed to be taken seriously by the government.
The United States has just promised $1 billion assistance of which $600 million will be in the shape of budgetary support. Also, Pakistan was promised market access in the United States and a better financial package by the IMF, World Bank, Asian Development Bank and other bilateral creditors.
Washington had also approved $600 million cash grant for Pakistan but so far nothing has flowed into the kitty.
Earlier, the UK had written off Pakistan's $40 million loans while Canada converted its $300 million debt into social sector funding through a swap. European Union (EU) had also offered additional market access which according to the officials concerned was likely to provide $400 million additional relief during the current financial year.
© The DAWN Group of Newspapers, 2001