New IMF precondition

Strengthening of the anti-corruption institutional mechanism is said to be a new International Monetary Fund (IMF) condition for the revival of Pakistan’s stalled IMF programme. The government is reported to have requested the IMF to exclude the strengthening of anti-corruption institutions from the list of prior actions, arguing that it did not fall within the purview and mandate of the Fund.

Good governance and fiscal discipline have always been the hallmark of the IMF programme. In the case of Pakistan, it has been found to be extra cautious; in other words, speculation remains that the IMF distrusts the country.

Earlier, at the commencement of the IMF programme in 2018, the autonomy of State Bank of Pakistan (SBP) was laid out as a precondition. Accordingly, much against the wishes of lawmakers on both sides of the aisle, full autonomy was granted to the governor and the board of directors of SBP through an act of parliament.

The IMF’s decision to include the precondition of corruption institutional mechanism in the programme appears to be driven by dramatic amendments the incumbent government has made to the National Accountability Bureau (NAB) law.

The government’s argument that it did not fall within the purview and the mandate of the Fund just does not hold water.

The IMF’s mandate is to promote global economic growth and financial stability, encourage international trade, and reduce poverty around the world. One of the IMF’s most important functions is to provide lending to countries that are experiencing serious economic distress. According to it, state governance is closely interlinked with state economy and fiscal discipline.

In 1997, the IMF adopted a policy on how to address economic governance, embodied in the Guidance Note “The Role of the IMF in Governance Issues”. To further strengthen the implementation of this policy, the IMF adopted in 2018 a new Framework for Enhanced Engagement on Governance (Governance Policy) that aims to promote more systematic, effective, candid, and evenhanded engagement with member countries regarding governance vulnerabilities — including corruption — that are critical to macroeconomic performance. The policy focuses on state functions that are most relevant to economic activity; namely: (i) fiscal governance; (ii) financial sector oversight; (iii) central bank governance and operations; (iv) market regulation; (v) rule of law; and (vi) Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT).

The IMF prima facie does have a mandate to add the precondition of corruption institutional mechanism to its programme. It is, therefore, unlikely that the IMF will step back and withdraw its precondition of anti-corruption institutional mechanism.

Copyright Business Recorder, 2022