ISLAMABAD (AFP) - Pakistan on Thursday asked the International Monetary Fund (IMF) for a US$5.3 billion (S$6.7 billion), three-year loan to boost growth in a bid to rebuild foreign exchange reserves, an energy crisis and a sliding currency.
The move comes just weeks after the new government was sworn into office after winning May elections that provided Pakistan with its first ever democratic transition of power.
The nuclear-armed state had long been expected to seek a fresh bailout package from the IMF after abandoning a US$11.3 billion loan programme in 2011 after refusing to carry out strict financial reforms.
That package had been agreed in November 2008 to stave off a balance of payments crisis just months after the last elections.
Finance Minister Ishaq Dar said there was no option but request the loan to save Pakistan from defaulting.
"We have not carried the begging bowl in our hands nor are we getting a grant, Pakistan is a member of IMF," he said.
"The government of Pakistan and International Monetary Fund have reached an agreement for a three-year programme of at least 5.3 billion dollars under an extended fund facility."
IMF Pakistan Mission Chief Jeffrey Franks said the loan was subject to further approval within the IMF and would then go to the executive board in early September.
The interest rate would be set at three per cent and that the loan would be payable over a longer period than conventional stand-by arrangements, he added.
Mr Franks said the aim was to bring down the fiscal deficit - which neared nine per cent last year - to a more sustainable level and reform the energy sector to help resolve severe power cuts that have sapped growth potential.
He added that an agreement with the State Bank of Pakistan was also designed to help rebuild forex reserves and keep inflation at acceptable levels.
As part of the loan agreement, Mr Franks added, the Pakistani government has developed plans to improve tax collection and to eliminate tax loop holes and exemptions. It also had a programme to restructure and even privatise public sector enterprises, which would generate significant revenues.
"The overall focus on this programme is to boost economic growth so we can have a better future for all Pakistanis," he said. "There will be some difficult decisions... but these will be necessary decisions to make sure that the economy is stable going forward."