Press Release: IMF Approves Extension and Augmentation of Stand-By Credit to Pakistan

December 17, 1996

The International Monetary Fund (IMF) today approved a request by the Government of Pakistan to extend the current stand-by credit through end-September 1997 and to augment the amount available under it by SDR 160.74 million (about US$231 million), in support of Pakistan's economic adjustment and reform program. The IMF's Executive Board took the decision in conjunction with the completion of the second review under the stand-by credit for SDR 401.85 million (about US$579 million) approved on December 13, 1995 (see Press Release No. 95/66).

The program supported by the stand-by credit was designed to reduce Pakistan's macroeconomic imbalances and to address a range of structural issues. However, achievement of these objectives has been undermined by slippages in policy implementation in 1995/96 and the first four months of 1996/97. In particular, Pakistan's fiscal policy entailed an excessive increase in bank borrowing by the government that put pressure on the balance of payments. These difficulties were compounded by a slow-down in structural reform efforts and had costly consequences in terms of external vulnerability and loss of market confidence. Against this background, the authorities have adopted a stabilization package consisting of a reduction of the budget deficit, an increase in interest rates, and a depreciation of the exchange rate to promote a rapid recovery in the country's international reserve position. These policies will be supported by far reaching actions on the structural front, with emphasis on an improvement in the operations of Pakistan's major banks, broadening of the tax base, and rationalization of government expenditures.

Pakistan joined the IMF on July 11, 1950. Its quota1 is SDR 758.2 million (about US$1,092 million). Its outstanding use of IMF credit currently totals SDR 960 million (about US$1,382 million).

Pakistan: Selected Economic Indicators

1993/94 1994/95 1995/96 1996/97*
(Percent change)
Real GDP 4.5 4.4 6.1 5.0
Consumer prices (average) 11.3 13.0 10.8 11.0
(Percent of GDP)
General government budget balance,
excluding grants (deficit-)
-6.0 -5.9 -6.3 -4.0
External current account balance,
excluding official transfers (deficit-)
-3.6 -3.6 -6.9 -5.9
(Weeks of imports)
Gross international reserves 12.6 12.9 8.2 6.4

Sources: Pakistan authorities; and IMF staff estimates and projections.

1 A member's quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its share in the allocation of SDRs.


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