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An article "IMF's eighth review" in Business Recorder (17th August) has stated that "under the EFF, Pakistan has completed nearly two years or around 66 percent of the programme and received a total of 2.88 billion dollars, while the 23-month Stand By Arrangement (SBA) signed between the PPP government and the Fund in November 2008 led to disbursement of 7.27 billion dollars. Therefore, the PPP government completed nearly 75 percent of the programme before the cessation of the SBA".
The writer has made comparison between SBA and EFF programmes. It may be noted that both the programmes are totally different in terms of their structure. The SBA was a 23 month programme for an amount of $7.2 billion, which was approved by their Executive Board in November, 2008 and was meant for budgetary support as well as for the Balance of Payment (BOP) and its upfront disbursement was more. The arrangement was augmented to $11.3 billion (700 percent of quota). After the completion of the 4th Review in 2010, the programme was extended till 30 September, 2011. But the Programme was suspended due to non implementation of some of the very significant conditions attached with the loan such as limiting fiscal deficit targets, implementation of VAT regime, finalisation of amendments in legislative framework for the State Bank of Pakistan and the energy sector reforms. Therefore, the Programme was suspended after merely four reviews.
The suspension of the programme posed a negative impact on the economy. As IBRD funding was stopped, World Bank and other international financial institutions closed the doors. International rating agencies downgraded their ratings for Pakistan. Foreign exchange reserves dropped significantly. International predictions were that Pakistan would default in June, 2014.
On the other hand, the EFF Programme is for strengthening the BOP position as well as the repayment of earlier loan taken by the previous government. Pakistan has completely repaid the earlier loan. If a comparison has to be made, it is more appropriate to compare that the SBA had only completed 4 out of 7 schedule reviews which were 57 percent of the programme, whereas under the EFF, 8 reviews out of 12 have been successfully completed which is 66 percent. Therefore, the EFF is much more successful a Programme. Further in terms of tranches received under both the programmes, it may be noted that Pakistan has received $4.3 billion out of agreed amount of $6.2 billion with present SDR rate, which comprises 69 percent and the Programme is still ongoing successfully and its 4 tranches are yet to be disbursed. Conversely, only 65 percent of the total amount was disbursed under SBA.
The writer has also not given due importance to highlighting the economic conditions prevalent at the time of two Programmes. When the present government came into power, it embarked on its comprehensive reform agenda to reinvigorate the economy, spur growth, maintain price stability, provide jobs to the youth and rebuild the key infrastructure of the country, which were the main feature of its manifesto. Therefore, Pakistan entered into IMF programme to improve the medium-term growth outlook, provide macroeconomic stability, strengthen its reserves and Balance of Payment position and open the window for multilateral, bi-lateral foreign funding for our mega development projects.
The present IMF programme is the only programme that has run successfully despite having a broad based structural reforms agenda besides the standard aggregate demand management features. Never before, the country has seen such major turn-around in its economic health as has been achieved during the programme. All major economic indicators have recorded remarkable improvement. One cannot find rival examples of the bold initiatives the present government has taken in making the adjustments in administered prices and new tax measures even at the risk of losing its political capital. The government did not hesitate to clear the mess it had inherited and swallowed the bitter pill of taking tough decisions only to restore the economic health of country.
Thanks to these interventions, IBRD after a gap of 3 years has allowed Pakistan to access its funding facilities. Likewise, World Bank, ADB have opened their windows. International rating agencies have changed their outlook from stable to positive and China and Pakistan has signed agreements worth $46bn.

Copyright Business Recorder, 2015

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