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Pakistan wants to repay costly loans ahead of schedule

KARACHI (January 21 2003) : Pakistan has told the International Monetary Fund that it wants to repay ahead of schedule costly multilateral loans, in view of the country's improving capacity to pay back foreign debts, a senior Finance Ministry official told Dow Jones Newswires on Monday.

“We discussed this with the IMF delegation and told them that Pakistan wants to repay expensive loans of the fund, Asian Development Bank and the World Bank,” said the official, who declined to be named.

The official was part of a Pakistan team currently in talks with a three-member IMF team led by George Abed, the IMF's Middle East director.

The team, in Pakistan for preliminary talks ahead of a review mission, is expected to leave on Tuesday.

On Saturday, Abed praised Pakistan for pursuing an aggressive reform agenda and promised to continue backing the new government to fight poverty, according to an official statement.

The finance official added that IMF officials also acknowledged it will be a “positive signal from Pakistan to the outside world if it starts paying back loans.”

But he said Pakistan and international donors will have to undergo intensive dialogue before an agreement can be reached, as normally multilateral loans aren't paid back early.

Recently, Thailand's government decided unilaterally to have its central bank pay back $4.8 billion in outstanding IMF debt by July – almost two years ahead of schedule.

Pakistan's foreign exchange reserves have hit a record $9.5 billion, tripling from September 11, 2001, when Islamabad's alliance with the US-led coalition against terror sparked higher remittances and US-led aid inflows.

Top finance officials had said in the past that Pakistan plans to use part of its reserves to repay expensive short-term IMF loans.

The country has been repaying most of its commercial loans over the last two years.

Pakistan owes around $650 million in IMF loans acquired under a standby facility before it got a three-year concessionary loan facility in December 2001.

In the last two years, Pakistan has acquired $2 billion worth of long-term cheap loans from the IMF, World Bank and Asian Development as it retires more expensive debt.

The finance official said Pakistan's fiscal deficit is likely to rise to 4.7 percent of gross domestic product in the year that ends June 30, compared with 6.5 percent in the last fiscal year. The original target was 4 percent.

“We had finalised an increase with the IMF back in August. The increase will cover additional costs for reforms in state organisations,” the official said, referring to the 4.7 percent target.

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