RISING FOREIGN DEBTS WEAKENING RUPEE
Sep 6 - 12, 2010
The negotiations between IMF and Pakistan concluded last week with the immediate relief of $450 million for emergency financing of relief operations of the affected and displaced people in the flood affected areas of the country, yet it is the time for the financial managers to convince the developed economies and the international donor agencies for waiver of the bulging foreign debt which is seriously affecting the exchange rate and Pakistani currency.
The IMF also assured for release of the last tranche of $1.7 billion under Standby Arrangement Program. The IMF financial support may provide a temporary relief yet the overall economy is not in a state of health to service debts of $54 billion. Hence, it is the time for the government in Pakistan to convince the world leaders as well as the international donor agencies to think in term of waiver of loans on humanitarian grounds. Measuring the magnitude of the flood losses in all terms: human loss, financial or agriculture loss is absolutely beyond possibility. However, one thing is for sure that economic recovery will take several years. Under the situation, Pakistan deserves a friendly response from the world purely on humanitarian ground.
Amazingly the majority of the people displaced by the floods and currently in relief camps in and around Karachi have bluntly refused to go back to their home towns or villages. This may add to civic and social problems of the urban centers if not addressed well in time and the homeless people should be provided proper support to rebuild their houses caved in the deluge.
Dominique Strauss-Kahn, Managing Director of the International Monetary Fund has said that the Fund will provide around US$450 million in immediate emergency financing to Pakistan to help the country manage the aftermath of the massive and devastating floods that have hit the country. "The floods in Pakistan are first and foremost a human tragedy still affecting millions of people. But this natural disaster will also have an important effect on the country's economy as it has caused serious damage to infrastructure, severely impacted economic outlook and resulted in a worsening of the fiscal situation," Strauss-Kahn said. "In response to this, I will be asking the IMF Board to approve $450 million of emergency assistance to be made available this month."
"Our dialogue with Pakistan on the current Stand-By Arrangement is progressing and the authorities have expressed their intention to implement measures for the completion of the fifth review of the program later this year. We will stay in close contact as these efforts proceed. Completion of the fifth review will allow the Fund to disburse an additional $1.7 billion, bringing total IMF disbursements (including emergency assistance) to $2.2 billion in the second half of 2010,î Kahn said.
He made the announcement after meeting with Abdul Hafeez Shaikh, Finance Minister of Pakistan, as the IMF and Pakistan's authorities discussed the country's economy in light of the floods. Commenting on these discussions, Shaikh said, "Pakistan remains committed to the reform efforts that will put public finances on a sustainable basis and lay the foundations for growth."
The emergency financing would be provided under the Fund's policy for Emergency Natural Disaster Assistance (ENDA). The ENDA amount will be allocated to Pakistan's budget to support the authorities' emergency response. The ENDA funding, which is subject to approval by the IMF Executive Board, will be disbursed this month. The emergency assistance comes on top of the $7.3 billion provided under the current SBA, in place since November 2008.