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The International Monetary Fund today agreed to extend a $ 5.3 bn three-year loan facility to Pakistan to boost the country's foreign exchange reserves, fight an acute energy crisis, and prop up a sliding currency.
Pakistan Finance Minister Ishaq Dar and Head of the IMF Mission Jeffrey Franks told a news conference here that they had agreed on the $5.3 bn long-term loan facility carrying 3% interest rate.
Dar said the agreement has paved the way for the programme to be presented to the Management and finally to the Board of Executive Directors of the IMF in the first week of September this year.
Fresh loan from the IMF is being sought to repay the huge loans that the previous government obtained from the Fund, he said.
Asked as to why Pakistan is again going to the IMF despite pledges by the leadership to break the begging bowl' the Finance Minister said the new programme is aimed at retiring past liabilities as "we cannot afford to default on our repayments".
Franks said the mission has reached a staff-level agreement with the authorities on the key elements of an economic reform programme that is strongly owned by Pakistan and that can be supported by a three-year arrangement.
"Pakistan faces a challenging economic outlook' compounded by an uncertain global and regional environment. Macroeconomic imbalances have combined with longstanding structural problems' particularly in the energy sector' to sap the country's growth potential," he said.
Franks said a determined effort was required to improve medium-term growth and move towards sustainable fiscal and external positions in the country.
The IMF Mission Chief lauded Pakistan's new budget, which he said was an important step in the right direction and the government had agreed to complement this with additional steps to achieve a substantial deficit reduction at the beginning of the programme.
"The mission and the authorities have agreed on the need for a sustained improvement in tax collections as well as a significant widening of the tax base," Franks said.
