Pakistan Agrees to $7.6 Bln IMF Loan
By Khalid Qayum
Nov. 15 (Bloomberg) -- Pakistan reached an agreement in principle with the International Monetary Fund on a $7.6 billion loan package aimed at preventing the nation from defaulting on foreign debt and restoring investor confidence.
Pakistan, has been forced to seek IMF assistance after its foreign-exchange reserves shrank 75 percent in the past year to $3.5 billion last week.
The State Bank of Pakistan, the nation's central bank, increased its benchmark interest rate by 2 percentage points, the most in more than a decade, to 15 percent on Nov. 12, citing inflation that reached 25 percent in October, a 30-year high.
The IMF funds would be available over 23 months and have an interest rate of 3.5 percent to 4.5 percent.
The rupee in October plunged to an all-time low and the balance of payments deficit in the first three months of the fiscal year started July 1 widened to $3.95 billion, from $2.27 billion a year earlier. The deficit reached a record $14 billion last year.
Standard & Poor's yesterday cut Pakistan's debt rating to CCC from CCC+, the lowest level in 10 years, citing the risk of a default on external debt payments of $3 billion due in the next 12 months.
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