Pakistan hails IMF loan

There were fears the country could default on loans

By Susannah Price in Islamabad

The Finance Minister of Pakistan, Shaukat Aziz, has welcomed the decision by the IMF to give Pakistan a loan of nearly $600m.

The minister said it was a major milestone in the government's effort to rebuild the economy.

Finance Minister Shaukat Aziz: Loan a major milestone

The loan comes as Pakistan was close to defaulting on its huge foreign debts.

The government sees the IMF decision as a significant breakthrough in its efforts to get the economy back on track.

The Finance Minister, Shaukat Aziz, said the government had worked hard on its programme of reforms to establish credibility with the donor community.

When the military government took power more than a year ago, it started carrying out a national survey of the economy in an attempt to boost the number of taxpayers - currently less than one per cent of the population - but this met widespread opposition.

Conditions

The IMF's programme outlines a reduction in the budget deficit being achieved through increased tax collection and expenditure controls.

Although the IMF previously expressed concerns about the military takeover, Mr Aziz said the programme was based only on economic criteria.

Pakistan has never successfully completed any previous IMF loan agreements, usually because it didn't enforce planned reforms.

The previous programme was suspended in March 1999 after the government failed to meet the conditions.

Pakistan has some $38bn in foreign debts, and the IMF loan greatly increases the government's chances of getting a restructuring agreement from the Paris Club of lenders next January.