KARACHI - The International Monetary Fund (IMF) has announced US$450 million of
immediate emergency financing for flood-hit Pakistan, while the World Bank has
raised to $1 billion its aid to help the country cope with catastrophic
flooding.
The flooding, which stretches the length of the country, has destroyed standing
crops and livestock and displaced millions of people, causing damage the
government estimates at $43 billion, or almost one quarter of the nation's 2009
gross domestic product.
The international lenders made the announcements on Thursday, after Pakistani
Finance Minister Hafeez Shaikh, who is leading a delegation in Washington for
discussions with the IMF to ease the
terms of an existing $11.3 billion loan, held meetings with World Bank
president Robert B Zoellick and IMF managing director Dominique Strauss-Kahn.
The World Bank would "raise its flood-related support in the current fiscal
year to $1 billion from $900 million," Agence-France Presse (AFP) reported
Zoellick as telling Shaikh. "We need to respond strongly to the crisis at hand,
but we need to do it without losing sight of important economic reforms."
The IMF will give Pakistan $450 million in emergency flood aid during
September, Strauss-Kahn said. The emergency assistance comes on top of the $7.3
billion already provided under the current stand-by arrangement, in place since
November 2008.
The emergency financing, which is subject to approval by the IMF executive
board, would be provided under the IMF's policy for Emergency Natural Disaster
Assistance.
"The IMF ... will be the first agency likely to disperse very rapidly money
which is absolutely needed," Reuters quoted Strauss-Kahn as telling reporters
after a week of discussions with Pakistani officials. "The most important thing
is to keep the Pakistani economy on track ... What is important is what was
decided by the government to do to improve the economic situation, especially
in the tax sector but in other fields also."
Completion of the latest IMF review (the fifth) of Pakistan's economy and the
government's response to conditions attached to the 2008 stand-by agreement
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.
Under the 2008 program, Islamabad pledged to implement tax and energy sector
reforms and give full autonomy to the State Bank of Pakistan. Shaikh reportedly
said the country remained committed to loan terms, including fiscal authority
and tax reforms.
"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," an IMF
statement released on its website on Thursday said.
The IMF in June pushed back the latest review, blocking the next loan
disbursement, as Islamabad had failed to contain spending within agreed limits
and fell behind in implementing value added tax.
The government had also agreed with the IMF to zero net borrowing from the
State Bank of Pakistan, yet the rising flood-related expenditures will force it
to heavily borrow from the central bank.
The United Nations has been asking the world community to help the Pakistani
government to cope with the humanitarian disaster. Relief efforts in
flood-ravaged areas are being stretched by the "unprecedented scale" of the
disaster, while funding has almost stalled, according to the UN.
"Given the number of those in need, this is a humanitarian operation of
unprecedented scale," AFP quoted Manuel Bessler, head of the UN's coordination
agency, as saying. "We need to reach at least eight million people, from the
Karakoram mountain range in the north to the Arabian Sea in the south."
The United States has offered flood-related aid worth $72 million and provided
helicopters to help relief operations.
Syed Fazl-e-Haider (http://www.syedfazlehaider.com) is a
development analyst in Pakistan. He is the author of many books, including
The Economic Development of Balochistan (2004). He can be contacted at sfazlehaider05@yahoo.com.
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