IMF interactions

Federal Minister for Planning, Development and Reforms Khusro Bakhtiar during a meeting with the International Monetary Fund (IMF) mission led by Harald Finger stated that projects envisaged under the umbrella of China Pakistan Economic Corridor (CPEC) have entered the second phase with a focus on industrialization, socio-economic initiatives and joint ventures in agriculture and irrigation, evocative of Pakistan Tehreek-e-Insaf's (PTI's) manifesto; he however acknowledged that during the first phase power generation was boosted.
Given that the Managing Director of the IMF Christine Lagarde had stated during the World Bank/IMF annual meeting that the Fund would require "absolute transparency" of Pakistan's debts, including those owed to China - a statement that echoed the sentiments expressed by US Secretary of State Mike Pompeo's - the silence in the official press release on any discussion on this subject was disturbing. Prime Minister Imran Khan during the long run-up to eventually forming the government at the centre about three months ago had consistently urged administrations to tell the truth to the people of the country. One would hope that the government does take the public into confidence on discussions with lenders, particularly with multilaterals, that would not only send a positive message to the public but, more importantly, to investors as well as members of the opposition. However, the Khan administration must also realize that some bilaterals have been (historically) reluctant to reveal the extent of their engagements in any country and China, Saudi Arabia as well as the United Arab Emirates belong to this category. A Business Recorder exclusive revealed that the Chinese Ambassador expressed concerns at two federal ministers' revelations about the Chinese assistance under consideration, a report sourced to Advisor to the Prime Minister on Commerce and Industries Razak Dawood.
The government's imperative to begin to focus on its message as well as its response to several areas of concerns both domestically, bilaterally and in the international arena must never be underestimated. For all the Khan administration's talk of ending corruption, improving the ease of doing business and providing a level playing field to investors, it is relevant to note that foreign direct investment declined by a whopping 46 percent between July to October 2018 - to 601 million dollars from 1.2 billion dollars during the comparable months of last year. While the bulk of this decline could be attributed to a slowdown in CPEC projects implementation as a consequence of the change in government yet this is an extremely disturbing element and requires immediate mitigating measures.
Reports indicate that during the meeting between Bakhtiar and the IMF mission, curtailment of Public Sector Development Programme (PSDP) was also discussed, no doubt with the objective of showing the government's intent to reduce budgeted expenditure, as well as insistence that robust economic planning is under way to enhance the tax to Gross Domestic Product (GDP) ratio. The message to the Fund (like during negotiations in previous bailout assistance packages) was that the new administration is focused on reducing the unsustainable budget deficit. Sadly, the Minister spoke in generalities and did not specify which specific measures are being considered to raise the tax-to-GDP ratio or which PSDP projects have been stonewalled by the incumbent government. This may lead the IMF team to conclude that the government is ill prepared for detailed discussions on the package conditionalities and may subject the country to the same flawed policies as during the 2013 Extended Fund Facility, for example, in the previous bailout package the IMF team inappropriately remained focused on raising total revenue rather than reforming the tax structure.
PTI was catapulted into power in the hope that the country would finally move towards achieving the economic take-off stage by reducing corruption, making everyone accountable through a proactive transparency policy and through informed policy decisions. Three months after the party formed the government at the centre, the drive against corruption appears to be limited to the media with no legislation in parliament, transparency of deals made during previous administrations (including revealing the blocked passages of the Liquefied Natural Gas deal with Qatar) have yet to be ensured and policy decisions remain pending as not a single taskforce has finalized its recommendations. One would hope that the situation improves as three months is sufficient time for the taskforces to finalize their recommendations for consideration by the cabinet especially as well-researched studies on all sectors are available but gathering dust within ministries and departments.