The Inter-national Monetary Fund (IMF) is exploring the possibility of providing financing to Pakistan through an emergency instrument for natural disasters, as the Fund already has a programme in place.
The issue of emergency financing would be discussed with Pakistan government officials in Washington, said Masood Ahmed, Director of the IMF's Middle East and Central Asia Department, in an interview with 'IMF Survey online' available on the IMF website on Tuesday.
"We'll be looking at how we, the IMF, can provide financial support during this difficult period. We already have a program in place and we also have the possibility of providing financing through an emergency instrument for natural disasters, and we will be discussing both with the visiting delegation", he said.
Masood said that Pakistan would have massive reconstruction costs down the road, running into billions of dollars. So, the economic effects would be large. "The IMF can help, in the first instance by looking at the impact, and then looking at how we can be part of the international solution to providing some support during this difficult period Pakistan is passing through".
He said that IMF is meeting with Pakistan government officials in Washington to evaluate the economic impact of devastating floods that have left millions homeless, and discuss ways in which the IMF can help in the recovery. Masood described the flooding as a "human catastrophe that is still evolving". In an interview with 'IMF Survey online', he said that the economic costs would be very significant.
The IMF is discussing this week the implications for the budget and longer term growth targets and how the IMF can help Pakistan as part of an ongoing $11 billion loan program. The program began in late 2008 and loan instalments are subject to a review by the IMF of Pakistan's economic policies and performance, including the government's budget deficit and making public finances more sustainable. The Fund will also discuss with Pakistan officials the need for emergency assistance. Pakistan Finance Minister Abdul Hafeez Shaikh is due to attend talks with the IMF on August 25.
Responding to a question on the economic impact of the floods on Pakistan, Masood said that the floods are having a major impact on the economy of Pakistan. "They are, of course, a human catastrophe and it's still evolving, but the economic impact is also going to be very significant. It's affecting the agricultural sector. Production is going to be down, which will affect the government's budgets because they will have to spend more and they'll be able to raise less revenue".
And then Pakistan will have massive reconstruction costs down the road running into the billions of dollars. So the economic effects will be large and they will last a long time, Director of the IMF's Middle East and Central Asia Department stated. He said that the IMF has been helping Pakistan over the past two years with the global financial crisis. Now the people of Pakistan, the economy of Pakistan are going to go through a more difficult period and the IMF stands with them to help.
In reply to another question, he said that IMF has a program with Pakistan and a team from Pakistan is coming. And the focus of those discussions is precisely going to be on how the economy is going to be affected by the floods. "It's a little bit early, but not too early to begin to make an impact on that. And then to see how the parameters of the existing program will need to be changed".
The Director of the IMF Middle East and Central Asia Department added: "It is clear that the effect of the floods on the fiscal side will mean that the budget targets that were included in the program, the growth projections that were included in the program, will all need to be revisited together. And that's what we're going to be doing".
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