A BR Genie tells us that the IMF is considering to impose civil service reforms as a part of its conditionalities in the first programme year of the fresh loans that Pakistan is seeking from the lender.
The IMF has had civil service reforms as a part of its structural conditions on Pakistani loans before, but they were mostly planned for third programme year, according to a 2002 report of its Independent Evaluation Office (IEO).
The proposal under consideration, therefore, would be a significant departure from the funds previous practises.
The IEOs report titled Evaluation of prolonged use of IMF Resources points out that the fund has been successful in pushing for structural reforms in areas like public debt management; interest rate liberalisation; and liberalisation of external transactions such as the trade and tariffs profile.
However, in other areas such as "the implementation of a broad-based general sales tax (GST), taxation of the agricultural sector, liberalisation of administered prices, and the setting of utilities tariffs, the reform process was very protracted" and achieved little.
The change in design - i.e. shifting the year of civil reforms to year one - offers hope. Here is why: the fund is a temporary provider of loans and its lending facility is relatively short lived compared to the time it takes to implement complex institutional reforms such as bureaucratic reformation.
This meant that a conditionality demanding institutional reforms in year three would largely be ineffective. Demanding that conditionality in year one, would mean that reforms stand a better chance than mere lip service and a few surface level changes.
There is little doubt Pakistan desperately needs civil service reforms; the economists at the Planning Commission and elsewhere in the academia and policymaking circles have long been calling for it.
In its 2010 report on medium-term development imperatives, the panel of economists advised the government to bring about structural changes in the size, composition and efficiency of the bureaucracy.
An earlier report on civil reforms by former central bank boss Dr Ishrat Husain also advised along similar lines. Amongst a host of other things, Husain advocated measures like bringing in specialists instead of generalists, providing better pay and promotion incentives, career path planning, performance management, continuous training and development.
Husains much applauded report, however, has been catching dust. And so, the PML-N would do well to pick up that report, build consensus and go ahead with the reforms. The IMF and the World Bank on the other hand should ensure better coordination.
A 2012 working paper #57 of the London School of Economics Asia Research Society lamented the lack of close collaboration with the World Bank as a result of which key areas, such as governance and institutional reforms in tax administration, civil service, and public enterprises, ended up being handled inadequately by both IFIs.
"This has been particularly damaging in the areas of tax reform and budget systems," its authors Ehtisham Ahmad and Aziz Ali Mohammed noted. Bear in mind that has been despite the fact that both institutions implicitly or explicitly recognised that these issues are central to long-term macroeconomic sustainability, according to the IEO.
Research has shown that lower quality of the civil service is associated with more prolonged use of the IMF - and Pakistan is a prime example of it. Whether the PML-N has the guts to gall the civilian bureaucracy and bring about the much-needed reforms will be found out soon.
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