Financial Experts Hold Crucial Economic Bailout Talks

September 27, 1998 - 0:0
ISLAMABAD, Pakistan Cash-strapped Pakistan will hold another round of talks with global donor agencies in October in Washington in a bid to get a bailout package for its battered economy jolted by international sanctions and a $32-billion external debt, a senior official said Friday. ``Our discussions will resume in Washington from Oct. 2,'' Hafeez Pasha, finance adviser to prime minister told a news briefing.

Pakistan is hoping for the bailout package, particularly after Prime Minister Nawaz Sharif promised to sign a global nuclear test ban treaty while in New York this week. A joint team of the International Monetary Fund and the World Bank has been holding talks in Pakistan for the past two weeks with Pakistan's financial managers which were aimed to decide a relief package for the country's ailing economy.

But the talks remained inconclusive and ended with hopes of a breakthrough in next round. Pakistan is scrambling for funds it desperately needs to avoid a default on the payment of external debt because its already fragile economy, has been shaken further by international sanctions for its series of nuclear tests in May in response to the hostile neighbor India. India also faces similar sanctions, but it is less dependent on foreign loans and aid compared to Islamabad. The IMF stalled an installment of $1.56-billion loan to Pakistan after the nuclear tests.

The country earlier said it may seek a moratorium on the payment of external debt if promised loans are not released. Pakistan's scant foreign exchange reserves have slumped further to $697 million this week from $750 million early this month, the State Bank of Pakistan said. These reserves are barley enough to meet the country's import bill of one month and the government is seeking emergency funds to bridge the balance of payment gap.

Pasha said Pakistan will hold further discussions in Washington for the resumption of its two stalled credit programs of enhanced structural adjustment facility and enhanced fund facility, but with expanded balance of payment support. Pasha said the quantum of financing will be around $5.0 billion, which does not include the $1.5 billion package agreed earlier this month with the Islamic Development Bank. He said besides the revival of stalled IMF programs, a possible debt restructuring and restoration of assistance from the World Bank was also among components of a relief package sought from the global donors.

The IMF in a statement said it welcomed the fact that despite a difficult economic environment and sever balance of payments constraints, Pakistan slashed its inflation and maintained a buoyant outlook for the agriculture sector growth. (AP)