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Pakistan to seek USD 3.7billion more in loans to offset virus impact

ISLAMABAD, PAKISTAN -Cash-strapped Pakistan will seek USD 3.7 billion additional financing from the three multilateral creditors, including another loan of USD 1.4 billion from the IMF, to cope with the challenges being posed by the novel coronavirus outbreak in the country, according to a media report on Thursday.

In addition to the International Monetary Fund (IMF) loan, the World Bank (WB) and the Asian Development Bank (ADB) will extend loans of USD 1 billion and USD 1.25 billion respectively to the country, the Express Tribune quoted Abdul Hafeez Shaikh, adviser to Prime Minister Imran Khan on Finance.

The step is aimed at soothing the markets that remained in panic despite Prime Minister Khan announcing a Rs 1.2 trillion economic relief package a day earlier.

The number of confirmed coronavirus cases in Pakistan sharply rose to 1,102. There were 417 patients in Sindh, 323 in Punjab, 131 in Balochistan, 121 in Khyber-Pakhtunkhwa (KP), 84 in Gilgit-Baltistan (GB), 25 in Islamabad and 1 in Pakistan-occupied Kashmir, according to the website of ministry of health services.

So far 8 people have died while 21 recovered.

Pakistan announced the decision on the same day the IMF and the WB made an appeal to all bilateral creditors to suspend debt repayments by countries that were eligible for loans from the WB’s arm, the International Development Assistance (IDA).

Shaikh also announced abolishing the capital value tax to support the Pakistan Stock Exchange that recorded a decrease of 1,336.03 points to settle at 27,228.80 on Wednesday.

Pakistan and the IMF have agreed on an additional upfront financing of USD 1.4 billion as part of the Extended Fund Facility (EFF), said Shaikh.

This amount will take the total size of the bailout package by the IMF under the EFF to USD 7.4 billion. The IMF board is expected to meet next month to approve Pakistan’s second review.

Shaikh clarified that the IMF would not disburse USD 1.4 billion out of its USD 50 billion emergency facility for COVID-19, which was only meant for countries whose economies were the worst hit by the pandemic.

However, Pakistan’s economy is expected to suffer significant damages, he added.

The finance adviser said Pakistan’s exports were likely to fall as the economies of the countries that purchased goods from the country would weaken.

Similarly, remittances from expatriates might decrease as well as the countries where they are based, including Saudi Arabia and the UAE, will be affected.

The economic activity in the country will reduce which in turn will decrease the income of people and taxes.

Shaikh said the WB would divert USD 1 billion and the ADB will also provide USD 350 million on an urgent basis. In addition to this, the ADB will also approve USD 900 million in June.

He also provided further details of about Rs 1.2 trillion economic relief package that the prime minister had on Tuesday announced to help the vulnerable people and economy to cope with the fallout of the virus.

The cash-strapped Pakistan government has been implementing austerity measures to improve the country”s finances. In July last year, Pakistan registered a currency reserve of less than USD 8 billion — enough to cover only 1.7 months of imports.

The IMF formally approved a USD 6-billion loan to Pakistan in July 2019, citing “significant” economic challenges. Pakistan has so far received billions in financial aid from friendly countries like China, Saudi Arabia and the UAE during the current fiscal year.