Pakistan has agreed to borrow $7.6 billion from the International Monetary Fund (IMF)to avoid adding an economic crisis to its struggle against militants, an official said on Saturday. Finance chief Shaukat Tareen said that the IMF had agreed in principle to the bailout after examining government plans to tackle Pakistan's yawning budget and trade deficits. “We believe that we can see commencement of a steady stream of inflows from now on, thereby eliminating the air of uncertainty,” Tareen said at a news conference. The loan will augment Pakistan's foreign currency reserves, whose rapid decline had raised the prospect of a run on the rupee and a default on the country's international debt. That risk has already eroded confidence in Pakistan's government and economy, deterring badly needed foreign investment at a time of slowing economic growth and runaway inflation. Tareen said the government would apply formally for the loan this coming week. The IMF has already signaled that it will consider the application quickly. Tareen said that Pakistan would receive payments over a two-year period and was hoping to receive a first substantial installment before the end of the month. He said the loan carried an interest rate of between 3.5 percent and 4.5 percent and that Pakistan would have five years to pay it back, starting 2011 or 2012. However, Pakistan's position on the frontline of the US-led war against terrorism makes its stability particularly vital to the international community. Opposition lawmakers complain that the IMF will impose austerity measures including cuts in government spending that will hurt Pakistan's many poor. Tareen, however, insisted that the IMF had merely approved the government's own still-unpublished reform plans. Earlier this year, the government slashed massive subsidies on fuel and other essential goods that had pushed its budget deficit to over 7 percent of gross domestic product in the year through June. Oil prices have since dropped back sharply. However, inflation in Pakistan remains above 20 percent, prompting the central bank to hike interest rates last week.
