NewsMine — war-on-terror — pakistan — before-1999-coup — Viewing Item

Imf blocked loans { October 13 1999 } Original Source Link: (May no longer be active)    http://news.bbc.co.uk/1/hi/business/the_economy/473047.stm http://news.bbc.co.uk/1/hi/business/the_economy/473047.stm Wednesday, October 13, 1999 Published at 18:57 GMT 19:57 UK Business: The Economy Pakistan closes its banks Pakistan's financial institutions and markets were closed on Wednesday, and the central bank ordered the suspension of all foreign exchange transactions. Bankers said they had received frantic calls from depositors asking to withdraw their foreign currency deposits. "We thought we had seen the worst in May last year and that a modicum of confidence was returning... The fear is that this coup could turn out to be a bigger jolt than the nuclear tests," said the head of research at one brokerage. Analysts said a delay by the military in announcing its economic policy plans was making the situation worse. "It seems they do not have a plan and if that is true it is more disturbing," said a senior banker. "They should realise they don't have time. What they need to do immediately is take into confidence the whole nation and the international community, come up with a credible plan and announce a set-up that has replaced the government." Pakistan Television quoted a statement from central bank Governor Muhammad Yaqub as saying October 13 would be a bank holiday. Fears of economic chaos, including a possible flight of capital abroad, may be well-founded. The coup attempt in Pakistan has taken place as the government has been trying to cope with serious economic problems. Foreign investment is in short supply, unemployment is high and the International Monetary Fund (IMF) predicts that the economy will slow down sharply. IMF blocks loan Pakistan's economic prospects took a turn for the worse last year, when the IMF and other international lenders halted new loans because of its tests of nuclear weapons. This was a serious blow because Pakistan has some $30bn of foreign debt and limited resources with which to pay it off. The IMF later relaxed its sanctions, but the respite was brief. On September 23 it again began withholding money from its $1.6bn loan to Pakistan, saying the government must first carry out reforms to its chaotic finances. The taxation system has come in for particular criticism from the IMF. Little money is collected, with only about one per cent of people paying income tax. The opposition has made much capital out of government plans to introduce a general sales tax of 15%, similar to the UK's VAT. Huge demonstrations in September by small businessmen persuaded the government to retreat. Much of the money that is received goes on servicing the government's debts and on its large defence budget. The relationship with the military - both its spending and its actions - is clearly problematical. Business alienated Many Pakistani businessmen have been disappointed with the government of Nawaz Sharif. They say there's little incentive for them to invest, and some say that the investment climate is noticeably more favourable in neighbouring India, which has begun liberalising its economy. The attitude of the government has also angered foreign firms. They have complained that the government has favoured the state-owned power generator over foreign firms. One of the largest, Hub Power, has called on Pakistan to honour a government guarantee to compensate it for losses. If Pakistan doesn't pay up, it could be declared in default, which would end its ability to borrow from any private financial institution.

Imf blocked loans { October 13 1999 } Imf disappointed { July 28 1999 } Sharif for the people Sharif ousted before Us reaction foreknowledge { October 14 1999 } Why army acted { October 13 1999 } Files Listed: 6

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