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Pakistan to borrow $625m from consortium of banks to halt rupee slide

Pakistan to borrow $625m from consortium of banks to halt rupee slide

ISLAMABAD: Pakistan will borrow $625 million from a consortium of seven local and foreign banks to boost reserves and stem a slide in the rupee currency, a senior Finance Ministry official said on Tuesday.

“Talks with the banks have been taking place for the past few months. Initially they were offering a loan with a 7.77 interest rate, but it was negotiated to 5.75 percent for one year,” the official, Rana Asad Amin, told Reuters.

Pakistan is desperate to boost its foreign exchange reserves, which were $10.374 billion in the week ending Sept. 13.

The rupee has lost nearly 7 percent of its value against the US dollar since the new government of Prime Minister Nawaz Sharif came to power in June.

One of the reasons Pakistan imposed a month-long ban on gold imports in August, apart from reports of gold smuggling to India, was because the government had been told by forex dealers that a significant amount of trade was used to cover gold imports, a market source told Reuters.

The International Monetary Fund’s board approved a $6.7 billion loan package for Pakistan earlier this month to help the South Asian nation revive its ailing economy.

The IMF said the three-year program should help Pakistan rebuild its reserves and prevent a crisis in the balance of payments. IMF loans generally come with conditions for economic reform and should encourage other donors to step in with more funds.