Pakistan set to join IMF programme?

[Naveed Yaseen]

By Sabihuddin Ghausi
KARACHI, Oct 21: Is Pakistan becoming a part of International Monetary Fund assistance programme? This question arises from a meeting of Pakistan’s team of negotiators led by Prime Minister’s Adviser on Finance Shaukat Tareen with IMF officials on Monday at Dubai.

Officials in Islamabad in their explanation called it a “routine quarterly review meeting’’ but bankers, businessmen and professionals insist that IMF holds quarterly reviews only with those countries that are either part or in process of becoming a part of its programme.

Media reported on Tuesday on meeting of IMF with a Pakistan negotiators team in Dubai when currency market in Pakistan was highly volatile and rupee showed wild fluctuations both in inter-bank and open markets. The foreign exchange reserves are fast depleting and all-round uncertainty stares in face of bewildered businessmen.

“An agreement with IMF will at least set a direction of economy, put a check on currency value volatility and stabilise rupee parity with dollar,’’ a top banker remarked. He understands the prevailing sentiment in Pakistan on IMF.

The IMF assistance was the last option for Mr Tareen as he had spelt out his strategy at a press conference last Saturday in which Pakistan’s first choice to explore economic salvage was from multilateral agencies and bilateral relief from friendly countries.

The second choice was help from “Friends of Pakistan,’’ a recently formed loose club of developed countries and friendly nations during President Asif Zardari’s visit to United Nations. It was originally scheduled to meet in October but recent reports suggest its meeting probably in last week of November.

“Money will not be placed on the table,’’ the visiting US Assistant Secretary of State Richard Boucher was quoted to have said in context of Pakistan’s expectations from Friends of Pakistan. This statement disappointed many of those in Islamabad, who for generations are living on a concept that Pakistan’s geo-political location and its political significance for the oil-rich kingdoms of the Middle East leave no choice for the US and others than to bail them out.

Now, it seems, the IMF approval and clearance has become a prerequisite for getting funds from bilateral and multilateral agencies and hence the meeting of Mr Tareen and team of negotiators in Dubai. The Dubai meeting is expected to set terms and conditions for the IMF programme. This may ultimately pave way for inflow of promised funds by the World Bank, Asian Development Bank and Friends of Pakistan.

“Mind it, the ADB approved $1 billion assistance only after IMF issued a letter of comfort in Pakistan’s favour,’’ recalled a businessman.

But the Pakistan government has started taking ‘’IMF pleasing measures’’ much earlier when subsidies were withdrawn from gas and oil. All subsidies on electric power are set to be removed by June 2009. Reports suggest that public sector development programme has also been brought under a cut without any formal announcement.

To quote a senior official, the Pakistan government has already given a “home grown strategy’’ for improvement of economy to the donors.

Shaukat Tareen led a team of Pakistan’s negotiators late last month to Washington to attend the annual meeting of IMF and World Bank. Bankers and businessmen in Karachi do not rule out a preliminary meeting of the Pakistani negotiators with IMF on the sidelines of its annual meeting. Dubai meeting on Monday was a follow up.

“What is objectionable is that IMF is negotiating with a Pakistani team in Dubai and not in Islamabad with obvious consent of the government,’’ remarked a banker.

“If there is no option left then IMF is the last resort,’’ Humayun Akhtar Khan, a former federal commerce minister, said from Lahore when asked to share his views on Pakistan joining an IMF programme. “I am not suggesting Pakistan to join IMF programme,’’ he made it clear. He said a two-year programme with $5 billion a year disbursement from IMF for Pakistan should help bring back economy on normal path.

“Tell me what’s wrong in becoming a part of IMF programme under present conditions,’’ a top banker remarked as he argued Pakistan’s economy suffers from an ailment because of many reasons. The IMF has a prescription that promises immediate cure with good long-term prospects.

According to this banker Hungary, Ukraine and many other East European countries are in line to seek assistance from the IMF and there is no harm if Pakistan, too, gets some cooperation from the IMF in balancing its external sector.

“IMF takes over control on decision making,’’ a senior economist in Lahore remarked. With a track record of association with Planning Commission in the past, the economist reminded that IMF has no “customer’’ at present and is desperately looking for a client. Pakistan has withdrawn subsidies and cut down heavily on public sector development programme even before making a formal request to the IMF.

“Whether we join IMF or not,’’ a business leader said to point out that the government will have to address expanding fiscal deficit, enlarging current account imbalance, depleting foreign exchange reserves and a steep fall in rupee-dollar parity.

Anjum Nisar, the recently elected president of Karachi Chamber of Commerce and Industry, believes that Pakistan’s present economic woes are disturbing but are of short term. “We desperately need $3 to 4 billion immediately to balance our current account,’’ he said but in long-term Pakistan will be on much sound footing. Even the current dismal economic scenario has a ray of hope.

He said that Pakistan’s exports have shown more than 19 per cent rise in the first quarter of 2009-09. Oil prices are falling and by all accounts the oil import bill will be hardly $7 billion and not $12 billion as was in 2007-08.

“All said and done, parliament is the best place for deciding on economic issues and budget presentation was an occasion to set direction of national economy,’’ the prominent economist in Lahore said. Decisions in parliaments, he said, carry weights that infuse confidence in people at large and businesses within the country and foreign countries have to show respect.

http://www.dawn.com/2008/10/22/ebr5.htm