The International Monetary Fund will give Pakistan US$450 million (RM1.4 billion) in emergency flood aid, providing some relief for a government overwhelmed by the disaster and facing renewed militant violence.
IMF Managing Director Dominique Strauss-Kahn said in Washington yesterday that the funds would be dispersed in “coming weeks.”
Strauss-Kahn said discussions with a delegation led by Pakistan’s Finance Minister Abdul Hafeez Shaikh on how to “reorganise” an US$11 billion IMF loan programme would continue.
He said Islamabad remained committed to terms including tax and energy sector reforms.
The floods struck just as the army said it had made progress in the war against the al Qaeda-linked Sunni Taliban.
Pakistan tightened security in the eastern city of Lahore yesterday after three bomb attacks killed 33 people and wounded 171. A new wave of violence would be especially difficult to manage given the enormity of the task of providing relief to millions of flood victims.
The IMF package had kept afloat and economy that was already fragile before the floods rampaged from the northwest to the south, damaging crops and infrastructure which Prime Minister Yusuf Raza Gilani estimated could hit US$43 billion, almost one quarter of last year’s gross domestic product.
The Lahore blasts which hit a Shi’ite procession on Wednesday bore all the hallmarks of pro-Taliban insurgents, who have carried out sectarian violence designed to destabilise the government.
“Security has been tightened in the city to prevent any such incident. We had called the (paramilitary) rangers after the blasts last night, and they are on high alert and can be called again any time if needed,” Sajjad Bhutta, Lahore’s top administration official, told Reuters.
Reflecting the growing reach of the Pakistani Taliban, US prosecutors overnight charged its leader Hakimullah Mehsud in the plot that killed seven CIA employees at an American base in Afghanistan last December.
The United States also added the Pakistani Taliban to its list of foreign terrorist organisations and set rewards of up to US$5 million for information leading to the capture of two of its leaders, Mehsud and Wali-ur-Rehman.
Washington wants to see a stable Pakistan that can help fight militancy in Afghanistan and inside its own borders. Pakistani and US officials are concerned that militant groups could seize upon the disorder caused by the floods to gain recruits.
Moody’s Investors Service changed to negative from stable the outlook on the long-term local currency deposit ratings and financial strength ratings of five leading Pakistani banks, due to economic damages caused by the floods.
The rating agency says it expects economic growth to slow down and inflationary pressures to rise sharply on account of factors such as food shortages.
Analysts said the IMF decision was a vote of confidence.
“This definitely sends out a positive signal that Pakistan is still on track in terms of getting financing from multilateral donors, which it critically needs, despite the country’s slippages on the fiscal side,” said Asif Qureshi, director at Invisor Securities Ltd.
Millions of flood victims are still homeless and potentially fatal diseases threaten to bring a new wave of death.
Pakistan has only secured 63 per cent of the US$459 million in funding needed for the initial emergency aid, the UN said.
Red Cross workers have faced angry crowds when distributing food and other supplies to flood victims, a disturbing trend that could jeopardise operations, a senior official said in Geneva.
There was also good news from the World Bank, which has increased funding to help Pakistan cope with the floods by US$100 million, to a total of US$1 billion.
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