International Monetary Fund board to meet on 3rd Feb for evaluating Pakistan’s economy – Alfalah Securities Limited
Karachi: The Executive Board of the International Monetary Fund (IMF) is scheduled to meet on February 3, 2012 in Washington for evaluating Pakistan’s economic situation, which suffers from the fears of rising fiscal and current account deficit reaching PKR 1 trillion and USD 2.154 billion respectively at current levels.
According to Alfalah Securities Limited, IMF’s evaluation on the country’s economic situation is being considered critical by external lenders as the outcome would decide whether the IMF would issue a Letter of Comfort (LoC) to Pakistan or not. Issuance of a Letter of Comfort (LoC) would enable the country to receive external inflows in the form of programmed loans by multilateral and bilateral donor agencies which would help in containing the current account deficit at a certain level and would also provide funds to meet its fiscal expenditures.
So far Pakistan’s economy in FY12 has relied on borrowings from the banking system to meet its fiscal deficit however with the widening current account deficit and with debt repayments of USD 1.4 billion to IMF in FY12, Alfalah Securities Limited believes a new bailout package from the IMF and issuance of a Letter of Comfort (LoC) would help the economic managers to improve fiscal discipline in the economy and would prevent the currency from a steeper devaluation by providing a cushion to the foreign exchange reserves.