IMF to review Pakistan budget in talks

The IMF said on Saturday it will review Pakistan's budget and economic prospects following catastrophic flooding during talks with senior Pakistani government officials starting on Monday.

Pakistani Finance Minister Abdul Hafeez Shaikh and other senior Pakistani finance officials are traveling to Washington for the talks with the IMF, which will also be an opportunity to speak directly to the Obama administration about aid.

The IMF talks are set to focus on the future of Pakistan's $10 bln IMF program agreed upon in 2008, which was already off-track before the floods hit. The disaster is set to compound Pakistan's economic woes as the government is forced to deal with more than 4 mln left homeless, along with widespread damage to crops and infrastructure.

“The scale of the tragedy means that the country's budget and macroeconomic prospects, which are being supported by an IMF financed program, will need to be reviewed,” Masood Ahmed, IMF Director for the Middle East and Central Asia, said in a statement.

He said the talks will evaluate the economic impact of the flooding, assess the measures needed to address the damage, and discuss ways in which the IMF can help.

Pakistan said last week the floods meant the country would miss this year's 4.5% GDP growth target, while its fiscal deficit is now projected to widen to over 8% of GDP. The government had targeted a fiscal deficit of 4% of GDP for fiscal year 2010/2011.

The talks come as Pakistan, which is embroiled in a battle against Islamist militants, is appealing for international aid to cope with the disaster and donors are worried over misuse of the funds.

Misgivings about the Pakistani government and concerns about corruption have been cited by analysts as reasons for the slow response by Western donors to the floods.

Even before the floods, donors were foot-dragging on aid for Pakistan.