$5 billion IMF loan likely by September

Pakistan is expected to get a $5 billion loan from the International Monetary Fund by the first week of September. According to well-placed sources, a formal request in this regard is expected to be made anytime soon. Sources also said the current Pakistan-IMF talks will send a positive signal to the global financial market about country's seriousness in relation to economic reforms.
In this regard, the government side has conveyed to the visiting IMF team about country's plan to put economic structural reforms in place much before it pays off all the IMF instalments in accordance with the agreed schedule. Not only would an IMF loan replenish falling forex reserves (Pakistan's forex reserves have fallen to 40 days of imports) has only to improve country's balance of payment position, it would restore global investor's confidence in an effective and meaningful manner.
This will also encourage lending agencies such as Asian Development Bank and the World Bank to extend a helping hand to Pakistan in infrastructure projects, particularly those related to energy. The sources said the present indicators painted bleak picture of foreign currency reserves and a widening budget deficit. According to sources, an IMF deal would help avert the economy going over an economic cliff.
The sources said the present government wanted the IMF to provide aid through a rarely tapped rapid financing instrument. Pakistan entered into a Stand-By Arrangement (SBA) with IMF in November 2008. The program was originally for 23 months (to October 2010). It was extended to end December 2010 after the second review; and further to end-September 2011 to enable Pakistan to complete GST reform, consolidate fiscal policy, and amend the legislative framework for the financial sector.
Originally, $7.6 billion was approved. It was enhanced to $11.3 billion after the second review in August 2009. Pakistan drew $7,477: 1st tranche of $3.1 billion in December 2008; 2nd tranche of $847 million in March 2009; 3rd tranche of $1.2 billion in August 2009; 4th tranche of $1.2 billion in December 2009; 5th tranche of $1.13 billion in May 2010. The remaining amount was not released due to non-implementation of agreed measures.