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Crisis: Pak PM to convene special Cabinet meet

By Rezaul H Laskar in Islamabad
November 10, 2008 17:44 IST
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Pakistan Prime Minister Yousuf Raza Gilani will soon convene a special meeting of his cabinet to discuss measures to address the country's economic crisis, including the possibility of an aid package from the IMF.

Advisor to the Prime Minister on Finance, Shaukat Tareen, called on Gilani at the PM's House today and apprised him of ongoing negotiations with the International Monetary Fund.

Tareen also informed Gilani of a "plan to present (a) nine-point agenda for the approval of the cabinet", said a statement issued by the PM's House. It did not give details of the plan.

"The prime minister assured the advisor of his support and said that a special cabinet meeting will soon be called to discuss the country's future economic plan," the statement said.

President Asif Ali Zardari recently visited Pakistan's traditional allies China and Saudi Arabia for cash assistance and technical support to avoid approaching the IMF for a bailout.

However, China and Saudi Arabia have not come forward so far with any assistance. The Pakistan government is expected to decide on approaching the IMF by November 15.

The State Bank of Pakistan's forex reserves have fallen to $3.53 billion, less than the import bill of $3.81 billion for September. Reports have suggested the government could also default on a bond maturing early next year.

Pakistan immediately needs about $5 billion to keep its economy afloat. Any aid from the IMF will be under a standby arrangement, carrying a higher interest rate than the Fund's poverty reduction and growth facility programme.

Meanwhile, Tareen has said the IMF's conditions for a bailout package will not be tough. "The IMF's conditions are not hard. All it wants is that Pakistan should fulfil the promises it makes prior to getting the financial assistance," he told reporters in Mardan in the North West Frontier Province on Sunday.

Tareen said Pakistan would provide details of all its projects to the IMF's board. He added that the Rupee is heading towards stabilisation and would gain more value in the coming days.

The 'Friends of Pakistan' group, particularly Saudi Arabia and China, are ready to help the country by providing support in different ways, he said. Saudi Arabia could help by providing oil against deferred payments, he pointed out.

Tareen also said the IMF programme could serve as a 'kind of guarantee' for aid that could be provided by the 'Friends of Pakistan' group and other donors.

The Pakistan government is hopeful of raising about $3 billion of aid from other sources after it enters the IMF programme, reports have suggested.

Pakistan government and the IMF had reached agreement on several contentious issues after weeks of protracted negotiations, Business Recorder newspaper reported on Monday.

These include the raising of the State Bank of Pakistan's discount rate from 13 per cent to 15 per cent before the disbursement of the first tranche of the IMF aid and a commitment to raise it further if inflation is not tackled, a 31 per cent increase in utility charges, reducing fiscal deficit to 3.9 per cent in the next fiscal, ending borrowing by the government from the State Bank and no government bailout for the stock market through the federal budget.
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Rezaul H Laskar in Islamabad
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