Clarifying Fund's position

Speaking at "Paisa Bolta Hai", an Aaj Television programme, the Resident Representative of IMF, Teresa Deban Sanchez, tried to explain the main features of the recently negotiated Extended Fund Facility (EFF) programme with Pakistan, emphasizing in particular some of the misperceptions associated with it. According to her, the IMF had not imposed any precondition on Pakistan to get assistance from friendly countries but wanted to ensure that international community's help was available to the country even beyond the period of three years. In fact, when Fund is engaged with a country, it also brings bilateral and multilateral engagement. Mike Pompeo's statement that the Fund was not going to give money to Pakistan to pay off Chinese loans had nothing to do with the programme as financial assistance was based on reaching understanding with the country. Also, the budget was fully consistent with the IMF programme and policies that are to be pursued during FY20. She also acknowledged concerns about inflation and the challenging taxation target of Rs 5.5 trillion for the current fiscal but added that revenue mobilisation was the top most priority to fulfil essential needs and obligations like debt servicing and increasing spending on health and education. A highly significant amount of revenues was to come from lifting SROs and exemptions. During implementation of the EFF, the Fund would also be calibrating with the government to assess the needs to protect the poor and the vulnerable which was an overarching objective of the programme.
We feel that the selection of the topic for discussion in the TV programme as well as the choice of the guest for clarification of some of the points were very suitable to the occasion as the matter was not only topical but was hotly debated in various circles in Pakistan at the moment due to the perceived negative repercussions of current EFF programme of the IMF with the country. It is generally apprehended that the current IMF programme, like so many others in the past, would require depreciation of the rupee and call for stringent monetary and fiscal policies that would result in higher inflation and unemployment in the country. This would adversely affect the quality of life of ordinary households and the poor who are already living from hand to mouth or are almost on the verge of starvation. However, while it is true that the hardships would intensify, the alternatives are even more ugly and painful. A country usually approaches the IMF for a programme when it is running out of foreign exchange reserves and facing the prospects of default and has no other source to get the needed assistance except the IMF to tide over the situation. It is quite clear that in a situation like this, it is definitely preferable to go to the IMF to ease the pain of adjustment and undertake the necessary reforms to stabilise the economy and put it on the path of recovery on a sustainable basis. In our view, it would have been better to also emphasize this aspect of the programme so that resistance to the programme by all and sundry in the country including from the opposition parties could be reduced and various conditionalities in the programme could be fulfilled more easily on time without seeking a waiver.
However, what was covered in the TV talk show was also useful to dispel some of the misunderstandings about the programme. For instance, it was generally perceived that certain conditions were imposed on Pakistan to get assistance from friendly countries during the programme period and the US had certain reservations about the programme. It was good on the part of Deban Sanchez to clarify that there was nothing of the sort as Pakistan was free to get financial assistance from friendly countries and other bilateral and multilateral sources would be encouraged to look at Pakistan more favourably. Besides, there was nothing wrong to say that the country was likely to face higher inflation, taxation target fixed for the current year was challenging and the country's debt was very high. These are the facts we have to acknowledge and make concerted efforts to rectify these weaknesses by initiating the necessary reforms which may be unpalatable or appear disagreeable to certain quarters.