August 31, 2000
Hardly a day passes without some kind of report about the programme being negotiated with the IMF. Hopes are raised or alarm is caused, depending upon the messenger. ESAF and EFF programmes, which sometimes were on and sometimes off-track, were suspended after Pakistan detonated nuclear devices in May 1998. A hurriedly arranged programme was put in place that allowed Pakistan to reschedule its bilateral debt under the Paris Club.
However, since the change of government last October 12, Pakistan has been seeking resumption of the ESAF and EFF programme and the IMF has been sending technical teams and even a mission has visited Islamabad purportedly to negotiate another programme. According to the latest news originating from government sources, Pakistan had met almost all major conditionalities of the Fund, which had been under discussion during the recent months between the two sides.
These included GST on trade and services, levy of agriculture income tax, resolution of disputes with most of the IPPs, liberalisation of agricultural trade, deregulation of petroleum sector, 15 percent increase in gas prices and allowing the rupee to find its conversion level free from artificial controls. Government sources have also hinted that final touches to the programme were to be given during the next visit of the IMF team in September, 2000 and the only issue to be decided is whether the country would get assistance under the suspended ESAF and EFF, another standby loan or the new Poverty Reduction and Growth Facility (PRGF).
While the country was waiting anxiously to hear the good news about the successful outcome of current negotiations, the IMF has come out with its own version. Its media chief, Tom Dawson, told a news conference in Washington on Tuesday that it was too early to talk about a loan to Pakistan. The IMF was awaiting progress on a number of fiscal and monetary issues and the talk about sending a mission to Pakistan was premature until and unless there was sufficient progress on these issues. This is no less than a bombshell for a nation, which had pinned all its hopes for economic revival and emancipation on the resumption of IMF assistance. We fear that even if a Fund mission does come to Pakistan, in September, it will only offer Pakistan a new menu of conditionalities, which may be very difficult to meet under the present dispensation.
The IMF has generally been very discreet, generally to the extent of being overcautious, in its pronouncements. Therefore, such a big divergence in the assessment of the current situation between Pakistan and the IMF, raises a number of questions which need to be answered. Was the nation misinformed in the last few months and who was responsible for the fault? While this definitely needs to be probed, the most important thing at this juncture is to fully reveal the actual current status of the negotiations with the Fund. There is no need and it does not serve any useful purpose to keep the people in the dark when the outcome of the negotiations will be public knowledge sooner or later and is likely to affect the vast majority of the people.
The IMF has stated very clearly that there are economic conditionalities, especially in the fiscal and monetary areas, which are holding back the next agreement. Although the Fund has not gone into the details, the government must come out with the truth if any conditionalities remain unfulfilled and the reasons for lack of progress on the stipulated reforms. Unless that is done, the credibility of the government may remain in doubt. It could be the lingering HUBCO-Wapda dispute or the legal bar on donor governments not to do "business as usual" with a military government or some other issues, which may be the actual obstacle. If a factual were given, people would understand the predicament of the government.
There could be more to the conditionalities the IMF is now talking of than meets the eye. Major shareholders of the Fund would like the present government to address their concerns on issues closer to their hearts such as signing the CTBT, putting the Kashmir dispute on the back burner, reining in Jehadi elements in the country, cajoling the Taleban to form a broad-based government sought by the United Nations in Afghanistan and to deal more forcefully with terrorism. Since the Fund hierarchy cannot talk openly about these issues, the prescription of more and more economic conditionalities could just be a cover for twisting the arm of a country highly dependant on their continued assistance.
In such circumstances, Pakistan has either to yield to get the economic life-line or face the risk of growing isolation, when it cannot stand on its own feet and depend entirely on its domestic resources. There is a price to be paid for following independent policies. It must be emphasised that the choice is ours and it is the policy and not the personalities conducting the fiscal and monetary policies, which matter. If the right information is given to the people, they will at least have a clear idea of the goal posts uphill and the difficulties in making a successful attempt on it. They may ultimately come to sympathise and agree with the spearhead if the goal posts are being shifted frequently and the team being victimised for ulterior motives.
Such an approach may also be useful in a number of other ways. Uncertainty is the greatest obstacle to investment, enterprise and production. For the last few months, almost every thing is at a standstill. There is a brain drain and capital flight from the country. A marked drift can be observed on the stock exchanges. Other indicators such as investment and forex reserves are also not satisfactory. If the future developments could be predicted with greater degree of certainty, irrespective of the fact whether the Fund is going to support this country or not, the economic agents could at least plan and act with more confidence, getting rid of the "wait and see" frame of mind they are in at present.
More Information on the International Monetary Fund
FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C íŸ 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.
