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Pakistan asks IMF for rescue loan | Pakistan asks IMF for rescue loan |
(20 minutes later) | |
Pakistan has asked for a loan package from the International Monetary Fund worth at least $7.6bn (£5.1bn), its top economic adviser has said. | |
Shaukat Tarin, adviser to the prime minister, said the loan would stave off the country's balance of payments crisis and stabilise the economy. | Shaukat Tarin, adviser to the prime minister, said the loan would stave off the country's balance of payments crisis and stabilise the economy. |
Pakistan needs the money in order to avoid defaulting on international debt. | Pakistan needs the money in order to avoid defaulting on international debt. |
It had been exploring other sources of funds in order to avoid stringent IMF conditions but failed to find a deal. | It had been exploring other sources of funds in order to avoid stringent IMF conditions but failed to find a deal. |
Speaking at a news conference in Karachi, Mr Tarin said Pakistan would apply formally for the loan next week. | |
The government stands to receive $4bn this year as part of the 23-month IMF deal, the AFP news agency reports. It will start repaying the loan in 2011. | |
Flight of capital | |
In the past, Pakistani officials have said the IMF would be their last option due to its unpopularity at home.Many people have felt the pinch of rising food prices | |
But Islamabad was left with few options faced with the need swiftly to raise billions of dollars in foreign loans to meet debt payments and pay for imports. | |
The Pakistani economy has grown by 7% to 8% over the last few years, but most of this growth has taken place in sectors such as consumer financing. | The Pakistani economy has grown by 7% to 8% over the last few years, but most of this growth has taken place in sectors such as consumer financing. |
By 2006, trade imbalances because of high imports caused the economy to slow down; a subsequent rise in international prices of food and oil worsened the situation. | By 2006, trade imbalances because of high imports caused the economy to slow down; a subsequent rise in international prices of food and oil worsened the situation. |
This led to a fall in the value of the Pakistani rupee and a flight of capital from the country. | This led to a fall in the value of the Pakistani rupee and a flight of capital from the country. |
IMF conditions entail cutbacks on the size of the government, development expenditure and some politically important subsidies. | IMF conditions entail cutbacks on the size of the government, development expenditure and some politically important subsidies. |
Following the recent global financial turmoil, the IMF has agreed loans to several nations to support their economies, among them Ukraine, Hungary and Iceland. | Following the recent global financial turmoil, the IMF has agreed loans to several nations to support their economies, among them Ukraine, Hungary and Iceland. |
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