ISLAMABAD: Pakistan is looking for the option to seek an emergency loan from the International Monetary Fund, to meet the losses caused by devastating floods across the country.
The preliminary estimates suggest that disasterous floods caused by Monster Monsoon, might have caused nearly Rs2.5 trillion in losses and the economic growth rate could slow down to just 2% in the current fiscal year.
The Ministry of Finance in its initial assessment showed that due to supply chain disruptions, the average inflation rate could also sharply accelerate to 26%, a level that is far higher than the State Bank of Pakistan and the IMF’s pre-flood projections of 18% to 20%.
The Ministry prepared the estimates of the losses to the economy due to the floods and these numbers would today (Thursday) be presented in a meeting, to be attended by other stakeholders, mainly the SBP and the planning ministry. These numbers are not definite and are subject to changes, according to the sources.
“Once the quantum of losses is agreed upon, the government will make a decision to approach the bilateral and multilateral creditors for financial assistance,” Dr Aisha Pasha, Minister of State for Finance said when she was asked whether Pakistan was going to get a condition-free financing facility from the IMF.
Dr Aisha said the initial estimates suggest that the losses to the economy were over Rs2 trillion, as almost everything changed after the floods.
“The news out of Pakistan is extremely distressing and my thoughts are with the victims and families affected by the severe floods,” Asian Development Bank President Masatsugu Asakawa said.
Asakawa said that he has assured Pakistan that the ADB stands with the affected people in these hard times and “will continue our support to build resilience and mitigate the impact of climate crisis”.
Finance Minister Miftah Ismail had this week informed the Prime Minister Office that the finance ministry was considering reaching out to the IMF for an emergency assistance package.
He raised the IMF financing issue during a flood-related meeting, also attended by Chief of Army Staff General Qamar Javed Bajwa.
Ismail said that two financing instruments were being considered by the finance ministry but the deliberations were at a very initial stage and no decision has yet been taken to approach the IMF.
In April 2020, the IMF had approved $1.4 billion emergency financing for Pakistan under the Rapid Financing Instrument (RFI) to help the country deal with the aftermath of Covid-19 pandemic.
This condition-free window again seems the only available option for Pakistan, as other financing instruments of the IMF either require prior actions or strong economic fundamentals –which are missing at the moment.
Under the ongoing Extended Fund Facility (EFF), the IMF is committed to provide another nearly $3 billion loan to Pakistan in one year, subject to successful completion of the remaining reviews. It is not clear whether the IMF will be ready to divert a chunk from the EFF to the RFI, as the country can get a maximum $3 billion from the IMF in a year, according to a senior functionary.
Read more: Government to announce strategy for reconstruction, rehabilitation of flood-hit areas soon: Saad
