IMF releases $252.6 million loan to Pakistan

By Reshmi Basu

New York, June 23 - The International Monetary Fund said it has approved a loan payment of $252.6 million to Pakistan as part of its program to help impoverished nations.

With this relief, Pakistan has received $1.263 billion under the IMF's three-year Poverty Reduction and Growth Facility (PRGF) program, which assists poor nations in reducing domestic debt and increasing spending on poverty-reduction plans.

The $1.52 billion loan was approved on December 6, 2001. Pakistan has said it will not ask for a renewal of the loan when it expires in December 2004.

After completing the eight review of the three-year loan, the IMF said Pakistan's gross domestic product picked up, inflation stayed within the target area and the budget deficit was lower than expected.

Poverty-related expenditures increased by 28% over the same period from a year ago.

The IMF also observed reforms in the financial system, in particular the transformation of the state-owned banking system into one that is predominately under control of the private sector.

"Continued prudent debt management remains a key priority," said Agustin Carstens, IMF's deputy managing director and acting chair, in a news release.

"The early repayment of some relatively expensive external debt is commendable, as well as Pakistan's successful return to international capital markets in early 2004."

Carstens added that for momentum to continue, Pakistan must push ahead with its reforms to simplify the tax system and broaden the tax base.

The PRGF loans carry an annual interest rate of 0.5% and are repayable over 10 years with a five and half-year grace period on principal payments.

The IMF also said it approved Pakistan's request for waivers for the non-observance of certain structural performance criteria and for the modification of one of the end of June 2004 quantitative performance criteria.

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