Controversy surrounds new IMF aid package for Pakistan
In a development that is likely to fuel the controversy surrounding the use of aid money in the current climate of world politics, the International Monetary Fund has granted Pakistan $1.3 billion in loans.
Aimed at reducing levels of poverty, the deal follows on from an earlier aid package geared to reducing the country’s massive foreign debt of $38 billion, which is almost three times the value of its annual exports. The IMF hopes the loan will also act as a vote of confidence that could pave the way for further debt relief from other European economies.
Fund officials said the new credit was approved on the basis of the progress made by Pakistan in improving its economic fundamentals. Crucially, they denied it was a reward for the country’s support of the anti-terrorist coalition, though they did concede the money would be used to offset the fall-off in the country’s textile exports, brought about by the combined effects of the Afghan war and the slowdown in the global economy.
However, this has done nothing to placate critics of the IMF who claim the money is being used as a political lever by the US. They say the US is able to do this because as the largest contributor to the Fund, it has a disproportionate influence on where and how the money is spent.
Under the terms of the loan agreement, Pakistan can borrow $1.3 billion over three years, commencing with an immediate payment of $109 million, with the money being paid over a 10 year period at an annual interest rate of 0.5 percent. The loan follows on from a $600 million aid package by the US to Pakistan, which US did describe as a reward for the country’s support in the Afghan war.
