Credible reports circulating in the corridors of the Ministry of Finance indicate that Pakistan is contemplating to enter into a new IMF programme worth $3 to $5 billion on terms and conditions different from those applicable under the November 2008 Stand-By-Arrangement (SBA). These terms and conditions will be harsh and difficult to fulfil. The IMF loan is unavoidable given the difficult economic conditions that the country is faced with, and the inability of the Government of President Zardari to cut down its non-development expenditure and to tax sectors that are outside the scope of the present taxation net.
A fifth review of the present IMF $11.3 billion Stand-By-Arrangement is due to take place in June when the request for a new loan would be presented. Finance Minister Dr Abdul Hafeez Shaikh, a well meaning and well intentioned economist, who needs greater political support at home, is scheduled to visit the United States from April 12 to attend the spring meetings of the IMF and the World Bank where he is expected to discuss the options for the new programme with the IMF officials in Washington. Negotiations for the next IMF loan programme will start right after the federal budget for the financial year 2011-12 is approved in June. Pakistan has been forced into the unpleasant situation that requires it to seek the new IMF programme to return the loans that it has so far obtained. A default in loan repayment has enormous and devastating consequences that have to be avoided. Although he is not an economist and does not enjoy their company, President Zardari is painfully and acutely aware of the consequences of default. Lacking other options, the President has reportedly advised his Finance Minister to explore securing further assistance from the IMF.
The IMF and the Finance Ministry officials are, therefore, in the preliminary stages of negotiating the second loan programme.
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