Farewell to the IMF

Though not completely free of rhetoric that his predecessors have traditionally employed on such occasions, Prime Minister Shaukat Aziz spelled out his vision for the country in his maiden address to the nation last Friday. One of the important points of the economic and political agenda unveiled by him was the country's relationship with the IMF.
The government, according to the Prime Minister, had decided not to avail of the last two tranches of PRGF amounting to $250 million each in line with its policy to end the country's dependence on the Fund.
In a tone calculated to convey a highly positive signal about the economy, he declared that "self respect and freedom have no price and we have broken the begging bowl forever".
Saying that economic progress cannot be achieved without political stability, the Prime Minister also invited all political stakeholders to a dialogue on the issues facing the nation.
There were clear indications from the present government in the last few months that Pakistan would not ask for further financial assistance/facilities from the IMF after the expiry of the present PRGF in view of the vast improvement in macro-economic indicators and accumulation of a large amount of foreign exchange reserves, which no longer required the country to negotiate another arrangement with the Fund.
However, the formal announcement to end the relationship at this stage and forego the last two instalments of PRGF was rather unexpected and might have been motivated by the urge of the economic policy planners to include in the address to the nation something substantive and popular to please the masses who have been most of the time made to believe that harsh reform measures were forced upon the country by the IMF and not necessarily preferred by the government.
Such an assumption is not far fetched because, on balance, the country was not going to lose anything by accepting the last two instalments of PRGF amounting to nearly $500 million.
The total disbursement of $1.52 billion from PRGF, it may be noted, had already been successfully negotiated and most of the conditions had already been met. More importantly, it was a highly concessional facility with a long repayment period and without strings attached.
The country could have gained in financial terms even if we had not used this amount for imports and kept it in term deposits with financial institutions abroad. An ordinary person could easily calculate that, compared to the issuance of foreign bonds, which the government proposes to launch in the near future, the money from the PRGF was dirt-cheap.
Anyhow, once the decision has been made its background and implications need to be properly understood and analysed. It should be a matter of satisfaction for Shaukat Aziz that he is the first Prime Minister in the history of Pakistan to bid farewell and get rid of the IMF in an honourable way.
Such a distinction is a reward for his achievement of putting the economy on a sound footing in the last few years. True, he enjoyed after 9/11 more favourable political circumstances than his predecessors since 1988 but it is also equally true that he had ensured that Pakistan met the economic targets set well before 9/11 under the punitive Extended Structural Adjustment Facility and later stayed the course under the PRGF.
Pakistan, once known as a single tranche country, has come of age and is now highly respected and rated in the world financial circles. The hard part of consolidating and improving economic fundamentals has been carried out successfully and it is no coincidence that Shaukat is now confidently looking for a growth rate of 8.0 percent and above and at the same time embarking on projects and plans which could bring the fruits of development within the reach of ordinary people.
However, the government and the people of the country must be reminded of a few basic realities. A high growth trajectory and the hoped-for welfare of the people would neither be something automatic nor can be sustained without major efforts. It will be necessary, among other things, to keep strengthening the current macro-economic profile that has developed under the stewardship of Shaukat Aziz as the finance minister during the last five years in the form of low inflation, stable currency, buoyant revenues and a lower budget deficit, a current account surplus and healthy forex reserves keeping pace with import volumes.
This would only be achieved if momentum of reforms is maintained, investment is massively increased together with significant improvement in productivity and the temptation to overspend is resisted at all costs. Obviously, this is a tough agenda in the circumstances now prevailing in the country.
Pressures are already mounting on the government to increase subsidies on various counts, raise spending on numerous projects and loosen the fiscal stance. The oil price surge and wheat shortages are other negative factors for the economy and its external sector.
The challenge would now be to face all these odds stoutly and, in particular, cushion the economy against extraneous shocks. Failing this, the country may at some point of time again be forced to request foreign assistance. After all, the IMF and other IFI's are only asked to intervene if a country finds itself unable to finance its foreign trade and external debt.
Mention needs also to be made here of the Prime Minister's announcement regarding recruitment to a large number of vacant job positions in the federal government and one hopes that his pledge to institute merit in the national fabric would ensure that such recruitment does not suffer from nepotism and corruption.
The resolve to amend the police ordinance for punishing the errant police officers for their excesses and the steps to end prolonged delays in the settlement of court cases reflect his objective assessment of the current environment in the country.
Similarly the setting up of commercial courts and the bar on grant of stay without hearing both sides to the dispute would serve the desired purpose of providing prompt justice to the people.
The prime minister has tried to focus on the real life problems of the people, more so by addressing the basic issues that include education and health. It is hoped that his proposal for free education upto matric in federal government schools would also be extended to provincial schools, for only then would this benefit the vast numbers of going children in the country. It should, however, be noted that even free education up to high school will fail to serve the desired purpose unless it is accompanied by a qualitative improvement in the education imparted in government institutions.
The standard of education now being what it is, it would be necessary to raise it to international level. The same can be said about the importance attached to the learning of the English language.
These laudable aims call for imaginative plans for their implementation. It would be in the fitness of things to set up a board of eminent educationists to draw a comprehensive and workable education plan to that end.