Source: BBC News

Pakistan is awaiting a decision from the International Monetary Fund on its request for a $7.6bn (£5.1bn) loan to shore up the economy.

The IMF board meets on Monday in Washington and the Pakistani rupee gained ground on expectation that the request would be approved.

If the loan is backed, the first transfer of about $3.5-4bn could happen within 48 hours.

Pakistan needs the money in order to avoid defaulting on international debt.

It had been exploring other sources of funds to try to avoid stringent IMF conditions but failed to find a deal.

Imbalances

In the past, Pakistani officials have said the IMF would be their last option due to its unpopularity at home.

But Islamabad was left with few options faced with the need swiftly to raise billions of dollars in foreign loans to meet debt payments and pay for imports.

Reports last week said the State Bank of Pakistan’s reserves could only cover nine weeks of imports.

The Pakistani economy has grown by 7% to 8% over the past few years, but most of this growth has taken place in sectors such as consumer financing.

By 2006, trade imbalances because of high imports caused the economy to slow down; a subsequent rise in international prices of food and oil worsened the situation.

This led to a fall in the value of the Pakistani rupee and a flight of capital from the country.

On Monday the rupee closed at 78.90/79.00 to the dollar compared with Saturday’s close of 79.06/79.16.

Analysts say the loan deal should stabilise the rupee in the short term. The rupee has plunged 22% against the dollar this year.

President Asif Ali Zardari is currently in the United Arab Emirates, with economic assistance high on the agenda.

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Tags: Asif Zardari, Debt, economy, IMF