Pakistan counts on IMF, World Bank, China loans

Pakistan counts on IMF, World Bank, China loans (NSI News Source Info) ISLAMABAD - November 15, 2008: Pakistan expects the IMF and other lenders to provide billions of dollars in loans soon, and China to pitch in with $500 million to avert a balance of payments crisis, the country's top economic adviser said. Shaukat Tarin told Reuters late on Thursday the government would soon deliver a "letter of intent" to the International Monetary Fund, paving the way for the world's lender of the last resort to rapidly release billions of dollars. "Hopefully it will be done soon. We have done lot of work on it so we want it to be completed soon," Tarin said. Asked it that could happen within a week, Tarin responded: "Yes, hopefully." Tarin told the Pakistan Senate on Thursday the country was likely to receive $5-6 billion from the World Bank and other international financial institutions by December, according to the Associated Press of Pakistan. The loan from China could arrive within weeks. "We want to get it as quickly as possible ... Hopefully it will be available in the next few weeks," Tarin told Reuters. Markets were disappointed when President Asif Ali Zardari and Tarin returned with little concrete to show from a trip to Beijing last month to garner support from one of Pakistan's most steadfast allies. China, like other potential lenders, is believed to have encouraged Pakistan to seek assistance from the IMF first in order to introduce some discipline to economic management, according to analysts. Pakistan is in talks with the IMF, though officials have been coy about saying whether a loan is being negotiated. Tarin told the Senate the IMF "has agreed to provide (a) facility on our own terms and conditions". He added one condition would be that the government stops borrowing from the central bank. "We discussed with IMF ... zero borrowing from State Bank. We believe there should be no net borrowing from State Bank," Tarin said. The government had wanted to avoid harsh conditions the IMF might attach, and explore other potential sources of loans first. Pakistan's central bank said on Thursday it has received $200 million from the Islamic Development Bank as the country's reserves are barely enough to cover nine weeks of imports. Potential donors are gathering in Abu Dhabi on Monday under the banner of the "Friends of Pakistan". It is an officials level meeting and not expected to result in loans being pledged, though it could pave the way for a ministerial meeting later. Pakistan's 8-month-old civilian government is banking on goodwill towards a country undergoing a transition to democracy after more than 8 years of military rule. The international community is concerned an economic meltdown in the nuclear-armed state could play into the hands of al Qaeda and allied Islamist militant groups seeking to destabilise the 170 million strong Muslim nation. Pakistan foreign exchange reserves are fast depleting. Reserves fell $20 million to $6.74 billion in the week that ended on Nov. 8, the central bank said on Thursday. The State Bank of Pakistan on Wednesday hiked its discount rate 200 basis points to 15 percent to curb inflation, currently running over 25 percent, reduce the current account and fiscal deficits, and build foreign currency reserves.