Pakistan: non-co-operation of IFIs?

Dismay expressed over non-co-operation of IFIs

ISLAMABAD: Pakistani authorities have expressed serious concerns over the non-cooperation of International Financial Institutions (IFIs) with the newly elected government led by Pakistan Peoples Party.

International Monetary Fund’s (IMF) technical mission, which held its technical review meetings with different federal economic ministries, was accordingly informed by one of a senior official that non-cooperation of lending agencies with the new government would be harmful for the democracy. This behaviour will strengthen the general perception in Pakistan than IFIs do not cooperate with democratic governments and extend maximum financial help to the non-elected governments and dictators, official sources told daily Times on Wednesday.

IFIs including IMF were equally responsible for Pakistan’s present day economic difficulties as they endorsed the Shaukat Aziz government’s un-sustained economic growth pattern and helped implement it. IMF mission was also informed that economic growth pattern relying on growth of services sector only was totally un-sustainable and was not able to face internal as well as external shocks— oil prices and food crisis— that resulted in to posing many difficulties for the economy at this point of time, the official sources said.

The policies adopted during the last 18 months of Shaukat Aziz’s government were the main reasons behind the present day economic difficulties of new government and it might take years to correct the situation. Responding to a concern shown by the IMF authorities on excessive central bank borrowing, Pakistani authorities informed the mission that State Bank of Pakistan is autonomous in limiting the borrowing of the federal government. If, State Bank of Pakistan did not followed the right path during the Shaukat Aziz’s government, its the fault of the then bank management. Present government has already decided to limit central bank borrowing and non-bank borrowing options would be utilised in 2008-09.

The meeting was informed that present government, despite a popular government having mandate from the all four provinces, had to take many un-popular decisions like increase in gas price, POL prices, electricity prices in a short span of time soon after transfer of power. In spite off these unpopular decisions this government is being subjected to conditionalities from lending agencies and a due share of financial assistance is being denied to it. IMF, which is keen for the elimination of all subsidies by December 31 2008, was informed that due to double digit inflation, the government would provide direct income support of Rs 34 billion to some 3.6 million poor under Benazir Income Support programme (BISP).

It was also informed that BISP would not be enough to provide relief to the poorest of the poor and the government would continue providing subsidies to different segment of society. In this regard, many proposals are under consideration for providing targeted subsidy and farming community would be the main beneficiary of the targeted subsidy for increasing agriculture productivity and reducing agricultural poverty. sajid chaudhry

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