Updated: Sep 01, 2022 18:02 IST
Islamabad [Pakistan], September 1 (ANI): As Pakistan struggles to deal with the devastating flood situation, the cash-strapped country is mulling another emergency loan from the International Monetary Fund (IMF), days after it managed to secure the much-needed bailout package to avert an imminent default.
Estimates suggest that devastating floods in Pakistan might have caused nearly 2.5 trillion Pakistani rupees in losses, The Express Tribune newspaper reported. The initial assessment says the economic growth rate could slow down to just 2 per cent in the current fiscal year.
Over 33 million people are estimated to have been affected by the floods with more than 1,000 deaths reported and about 1,500 injured. More than 6.4 million people in Pakistan are in dire need of humanitarian aid as the Shehbaz Sharif government struggles to cope with the unprecedented situation.
“Our team is also helping to assess the damage caused by floods to draw up plans to support longer-term rehabilitation efforts and strengthen communities’ climate resilience,” Asian Development Bank (ADB) Country Director for Pakistan Yong Ye said.
The Pakistan Finance Ministry has prepared the initial estimates of the losses to the economy due to the floods which would be presented in a meeting on Thursday, the report said. According to the Pakistani daily, this meeting will be attended by other stakeholders, mainly the State Bank of Pakistan and the planning ministry.
On Monday, IMF’s Executive Board completed the combined seventh and eighth reviews of the Extended Arrangement under the Extended Fund Facility (EFF) for Pakistan. The Board’s decision allows for an immediate disbursement of SDR 894 million (about USD 1.1 billion), bringing total purchases for budget support under the arrangement to about USD 3.9 billion.
The IMF said that Pakistani authorities have taken important measures to address worsened fiscal and external positions resulting from accommodative policies in FY22 and spillovers from the war in Ukraine which have placed significant pressure on the rupee and foreign reserves.
Pakistan is at a challenging economic juncture. A difficult external environment combined with procyclical domestic policies fueled domestic demand to unsustainable levels. According to IMF, the resultant economic overheating led to large fiscal and external deficits in FY22, contributing to rising inflation and eroded reserve buffers.
IMF said its program seeks to address domestic and external imbalances, and ensure fiscal discipline and debt sustainability while protecting social spending, safeguarding monetary and financial stability, and maintaining a market-determined exchange rate and rebuilding external buffers.
Antoinette Sayeh, Deputy Managing Director and Acting Chair, said Pakistan’s economy has been buffeted by adverse external conditions, due to spillovers from the war in Ukraine, and domestic challenges, including accommodative policies that resulted in uneven and unbalanced growth.
“Containing current spending and mobilizing tax revenues are critical to creating space for much-needed social protection and strengthening public debt sustainability. Efforts to strengthen the viability of the energy sector and reduce unsustainable losses, including by adhering to the scheduled increases in fuel levies and energy tariffs, are also essential,” she added. (ANI)