Pakistan welcomes IMF $6.7bn loan

ISLAMABAD: Pakistan on Thursday welcomed a $6.7 billion loan from the International Monetary Fund.

The IMF executive board authorised a three-year loan, making an initial $540 million available to the Pakistani authorities.

The remaining amount will be evenly paid out over the duration of the programme, subject to the completion of quarterly reviews, the Washington-based global lender said.

"We welcome the timely decision by the IMF board in approving the loan," Rana Asad, a spokesman for the Pakistani finance ministry, told AFP.

He said Pakistan had got the loan on its "own conditions" and that the money would be used to pay off previous loans.

"Basically it is for debt repayment," he told AFP.

The aid is an Extended Fund Facility, which is aimed at helping a country that faces serious balance-of-payments problems because of structural weakness that require time to address.

The repayment period for an EFF loan is between four-and-a-half and 10 years.

In its announcement of the loan on Wednesday, the IMF said Pakistan's adherence to the programme would likely encourage financial support from other donors.

"Despite the challenges it faces, Pakistan is a country with abundant potential, given its geographical location and its rich human and natural resources," the IMF said.

"The authorities' programme is expected to help the economy rebound, forestall a balance-of-payments crisis and rebuild reserves, reduce the fiscal deficit, and undertake comprehensive structural reforms to boost investment and growth."

The loan is aimed at reducing Pakistan's fiscal deficit -- which neared nine percent of gross domestic product last year -- to a more sustainable level and reform the energy sector to help resolve severe power cuts that have sapped growth potential.

The request for a loan came just weeks after May elections that marked the country's first democratic transition of power, putting Prime Minister Nawaz Sharif in office for a third time.

The new loan came after months of negotiations.

Pakistan abandoned a previous $11.3 billion IMF loan programme in 2011 after refusing to carry out strict financial reforms, and still owes about $4 billion to the Fund. (AFP)