No financial close by FoDP

Foreign Minister Shah Mehmood Qureshi and the team he led to Istanbul to attend the Friends of Democratic Pakistan (FoDP) meeting had a one point agenda: to convince our 'friends' to release the 5.3 billion dollar pledges made in Tokyo on April 16 this year.
International news agencies were unanimous in their assessment of the meeting: "Pakistan failed to secure swift aid from donors to help the cash strapped country... only a fraction [of pledges made in Tokyo] has arrived with some donors wanting more details of where the money will go."
Quoting Foreign Minister Qureshi, international media reports added that "he said his country's presentation of a series of measures aimed at building infrastructure, improving security and reducing poverty in the north-west won praise." The Pakistani independent media was not represented in this forum.
However, what is known as the official media did accompany the Foreign Minister and its reports, carried by some sections of the Press, provide, as is to be expected, a positive twist to the outcome of the meeting by dwelling on the 'praise' for the presentations. Be that as it may, it is evident to all that the Foreign Minister failed to get a financial close on the pledges - a failure that is likely to impact on our macroeconomic indicators.
In this context, it maybe recalled that Richard Holbrooke, the US Special Representative for Pakistan and Afghanistan, and a participant in the on-going FoDP meeting, had revealed while he was on a visit to Pakistan a week ago, that the country is guaranteed to receive 2 billion dollars from the Tokyo pledges shortly: one billion from the United States and another billion from Japan; one would have hoped that he had been as successful in convincing his European partners as well as friends in the Middle East particularly Saudi Arabia to extend assistance to Pakistan.
And yet one cannot fault the US government's commitment to using its influence to generate more funds for Pakistan. Proof of the pudding is in the fact that it would be none other than Barack Obama who is expected to chair the FoDP meeting in the US on the sidelines of the sixty-fourth meeting of the UN General Assembly. And yet if countries are not comfortable with our capacity to execute projects quickly and in a transparent manner one doubts if President Obama's support for us will generate any money either.
In other words, it is imperative for the government to conclusively prove its ability not to formulate projects but to execute them in a transparent manner. It is, however, significant that the latest report on Pakistan on the IMF website projected disbursements from FoDP at 2 billion dollars in 2009-10. Two background factors need to be emphasised in terms of the possible impact of the delay in the FoDP pledges.
First and foremost, Shaukat Tarin the Finance Minister, had repeatedly assured the country that the additional support requested from the International Monetary Fund (IMF), referred to as Augmentation of Access Under Stand-By Arrangement, of a little over 3.2 billion dollars, in addition to the 7.6 billion dollar stand-by arrangement in November of 2008, was an interim measure and the amount would be repaid as soon as the money pledged by the FoDP were released.
According to the IMF, and Pakistan government cited as a source, "with the augmentation, Pakistan's GRA credit outstanding would peak at nearly 72 percent of gross international reserves, equivalent to 5.9 percent of end period gross reserves and 15.3 percent of exports of goods and services in 2013/14. These metrics are high relative to other exceptional cases, and indicate substantial risks to the capacity to repay the Fund."
The Fund adds, however, that Pakistan has always met its obligations in the past. Be that as it may it is relevant to note that the 3.2 billion augmentation loan from the IMF as well as the 1 billion dollars each from the US and Japan would cover the budget requirements which had identified 5.3 billion dollars from the FoDP.
And second, the IMF did note in its end July publication "that programme performance has been mixed. All end-March quantitative performance criteria were met (related largely to the State Bank), but structural reform has been slower than programmed." Waivers were sought by the government on a range of programme conditions namely fiscal deficit target, applicability of end-June quantitative criteria and waivers for non-observance of the two structural performance criteria for end-June."
In short, reforms are still to be implemented, because as noted by Tarin, the government is still engaged in fire-fighting. There is considerable evidence to suggest that the economy is not out of the woods yet. Reliance on debt has risen and reached dangerous levels as noted by the IMF.
Whether the government literally shuts its borders for all but critical imports like oil, undertakes the needed structural reforms including fiscal reforms and targets its own money for development, thereby reducing heavy reliance on expensive foreign assistance to support balance of payment remains an option.
However, it appears that focus would remain on generating assistance from the developed world. In this case it is critical that the government improves governance reforms as well as its capacity to execute projects efficiently and in a transparent manner.