Washington DC (BBN) – The International Monetary Fund (IMF) has approved a US$ 451 million loan for Pakistan to help the country manage the immediate aftermath of the massive and devastating floods.

The IMF executive board’s approval enables the immediate disbursement of the full amount of this emergency assistance; with the hope that this disbursement will catalyze and speed an adequate level of disbursements by other members of the international community, an announcement said on Wednesday.

The $451 million in emergency assistance will be directed to the country’s budget. It will help finance the additional spending to help the population affected by the floods and the associated immediate foreign exchange needs, thereby mitigating a decline in external reserves and supporting confidence in Pakistan’s external position.

Pakistan’s economic outlook has deteriorated sharply as a result of the floods. The agriculture sector, which accounts for 21 percent of Gross Domestic Product (GDP) and 45 percent of employment, has been hit particularly hard.

Initial and preliminary assessments suggest that real GDP growth is unlikely to exceed 2¾ percent in 2010/11, mainly because of sharply lower agricultural output.

Owing to the disruptions in economic activity, pressure on the country’s budget is expected as well as a weakening of the balance of payments position.

“An updated estimate on the economic impact of the floods should be available after the completion of damage and needs assessment in the fall,” it added.

BBN/SI/AD-16Sept10-10:34 am (BST)