IMF approves emergency fund of $450 million
The International Monetary Fund has agreed on US$450 million emergency funding for Pakistan in response to flash floods in the latest country review meeting which follows the US$1.0 billion & US$2.0 billion pledged the by WB and ADB respectively.
These pledges will support in bridging the increase in fiscal deficit which, as per government preliminary estimates, is expected to up by 1-2ppt to 6.0%-7.0% of GDP in FY11E – intial revised estimate was 5.0% of GDP.
US$450mn by the IMF and US$100 million by the WB will be disbursed immediately for relief, whereas remaining pledges by the World Bank and the ADB are most likely to span over a couple of years and would primarily support reconstruction and rehabilitation.
Expectations regarding relief and aid related disbursements from donor agencies should help in containing negative fallout of the floods on KSE to a certain extent.
However, the key signpost to watch for asset prices is any medium term relaxation from IMF in terms of repayment or targets. While details on the one-off levy remain scant, imposition on corporate sector will adversely impact sentiments.
KASB Securities and Economics Research