Facility? What facility?

IMF Managing Director Dominique Strauss-Kahn yesterday

The Pakistani authorities have requested discussions with the IMF on an economic program supported by financial assistance from the Fund to meet the balance of payments difficulties the country is experiencing as a result of high food and fuel prices and the global financial crisis … The amount of Fund financing under a Stand-By Arrangement has yet to be determined. Financing could be made within framework of the Fund’s Emergency Financing Mechanism.”

Prime Minister of Pakistan’s economic adviser, today

The adviser, Shaukat Tarin, told a news conference in Islamabad that the country still hoped to secure funds from other lenders, including friendly governments.  “We have not formally requested the board of the IMF for a facility, as of now,” Tarin said.  Tarin said Pakistan was still hoping for help from other lenders, including friendly governments, to fill a financing gap of between $3.5 and $4.5 billion (2.2 and 2.8 billion pounds), but Pakistan had to be prepared for any possibility.

“In the next 15 to 30 days, we need cash,” Tarin said.  “We’ll make a formal request to the board of the IMF when we believe we aren’t getting enough money from option A or B,” he said, referring to plans of getting assistance from multilateral donors, other than the IMF, and friendly governments.  But, Tarin said any IMF facility would have to be on the basis of a plan Pakistan has proposed to the fund.

It could just be technicalities and brinksmanship (Tarin is not the finance minister and there has been no proposal before the IMF board yet).  Or did someone jump the gun?  Although the Fund looks in some ways to be back in business as a crisis lender, the extreme reluctance of countries to go to them without some leverage from other sources is noteworthy.  For instance, Iceland seems reluctant to be solely dependent on Fund financing.

1 thought on “Facility? What facility?

  1. No surprise there – the Fund tends to require economic and structural policies like higher taxation, higher interest rates, and minimized government spending in order to attract foreign investment (Read: get foreign currency back into the recipient country so that they can pay off the IMF loan). These policies have tended to be absolutely brutal on the economies that take them.

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