ISLAMABAD: Pakistan asked for a new bailout loan from the International Monetary Fund (IMF) yesterday to boost its ailing economy, settling on an initial package of $5.3 billion following weeks of talks with a visiting IMF delegation.
The request marks a step forward for Pakistan's new Prime Minister Nawaz Sharif as he tries to find ways to fix the country's finances and show his commitment to restructuring its moribund economy.
But it also highlights a sense of urgency for Pakistan where the central bank has only about $6.25bn left in reserves, enough to cover less than six weeks of imports.
"This is a Pakistan-designed programme. It includes bringing the fiscal deficit to a more sustainable level," Jeffrey Franks, the regional adviser to the Fund on Pakistan said.
"The overall focus of the programme is to boost economic growth so there is a better life for vulnerable Pakistanis."
Lodging a loan request is the first step in a potentially long process that will involve Pakistan committing to reforms, particularly on broadening its narrow tax base and cutting subsidies, which lenders say benefit mainly the rich.
Pakistan had originally asked for a $7.2bn programme but settled on $5.3bn after the talks.
The Asian Development Bank, one of Pakistan's major lenders, has estimated the country will need $6bn to $9bn to meet its obligations, including about $5bn in outstanding debt on an earlier $11bn IMF package suspended in 2011.