IMF Agrees to Lend Pakistan $9 Billion
The International Monetary Fund has agreed to lend Pakistan $9 billion, a source familiar with the negotiations told CNBC. There will also be another meeting in November to negotiate for more aid with Gulf countries.
Pakistan, a nuclear-armed U.S. ally, has been in discussions with the IMF since last week but officials from both sides have been tight-lipped about the talks. Faced with dwindling foreign reserves, it has a few weeks to raise billions of dollars in foreign loans to meet debt payments and pay for imports.
"We are already talking to the IMF and they are talking about terms and conditions," Prime Minister Yousaf Raza Gilani told Reuters in an interview on the sidelines of a World Economic Forum meeting in Istanbul. "Whether those terms and conditions are suitable to Pakistan or not, my advisers have to make up their mind," he said.
Islamabad's seven-month-old government, running Pakistan after more than eight years under former army chief Pervez Musharraf, has been reluctant to go to the IMF although many analysts believe this is inevitable.
An IMF package often involves cutting spending, raising taxes and tightening monetary policies.
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The "Friends of Pakistan" group -- which includes the United States, the European Union, the UAE, the United Nations and China -- is due to meet next month.
Pakistan's economic woes began before the global financial crisis set in but analysts say the crisis has compounded Pakistan's difficulties by making donors reluctant to step in.
Gilani's top economic adviser, Shaukat Tarin, said earlier this week Pakistan had no alternative to seeking IMF money, but that Islamabad "would accept their program on our terms".
Pakistani newspapers have been full of speculation about the conditions which might be attached to an IMF deal, of which the most important would be a big cut in defence spending.
Gilani said there was "no possibility" of default and Pakistan would seek deferred oil payments from Saudi Arabia.
Saudi officials have said they will attend the Abu Dhabi talks, but have highlighted the importance of financial institutions.