Pakistan has been a perennial borrower from the International Monetary Fund (IMF). The Fund's website indicates that as far back as in 1984 the government of Pakistan has been repaying loans under the Poverty Reduction and Growth Trust (inclusive of the Stand-By Arrangement Facility) and interest on those loans to the IMF.
Musharraf's government went to the Fund twice - once in November 2000 for a Stand-By Arrangement (SBA) of 465 million Special Drawing Rights (SDRs) all of which were withdrawn before the expiration date of 30 September 2001, and again in December 2001 for 1033 million SDRs under Exogenous Shocks Facility (ECF) out of which only 861.42 million SDRs were withdrawn with the expiration date of 5 December 2004. Two glaring facts emerge from these statistics. First, soon after the military coup that deposed the elected Prime Minister Nawaz Sharif on 12 October 1999 the Musharraf regime, a pariah in the parity of nations, was compelled to seek IMF assistance for balance of payment support. The next year was markedly different and the decision of the IMF to release ECF at the time may be sourced to US pressure on the Fund subsequent to al Qaeda terrorist attack on the twin towers in New York City as well as on the Pentagon.
The decision of the government to leave the ECF programme mid way and not avail of the remaining 172.28 SDRs is premised on the fact that post 9/11 the US enabled the Musharraf government to access loans as well as grant assistance in return for our full engagement in what the Bush administration referred to as the global fight against terror. Critics of course maintain that as the floodgates of aid were opened by the US the Musharraf government failed to invest adequate amounts in Pakistan's deficient energy and water sectors in particular which accounts for the bulk of our economic woes today. By 2006 and 2007 there was an acknowledgement by the government notably by Musharraf as well as his Prime Minister Shaukat Aziz that dams must be built and water reservoirs constructed.
The last SBA approved by IMF Board on 20 November 2008 finally expired on 30 September 2011. The amount approved was 7235 million SDRs and the amount drawn was 4936 million SDRs with the remaining amount not disbursed due to the failure of the federal government to comply with critical conditions including broad basing the tax system, eliminating the inter-circular debt plaguing the energy sector and reducing subsidies according to agreed loan conditions.
But does the fact that we are not on any IMF supported programme imply our financial commitments to the Fund would decline? Over the long term yes if we do not procure any further assistance however the situation till 2015 is not expected to improve in terms of reduced payments to the Fund. In 2011 the government of Pakistan has to pay 79 million SDRs (almost 7 billion rupees) to the Fund. By 2012 the figure would rise to 1.5 billion SDRs, by 2013 there is a further escalation to 2.4 billion SDRs, by 2014 1.39 billion SDRs and by 2015 the amount would decline to a manageable 306 million SDRs In short, if the government does not seek assistance from the Fund for the next three to four years it would witness a marked decline in its repayment to the Fund alone.
Assistance from IMF implies that the country is on a rigidly monitored programme and failure to comply with the agreed conditions after a grace period is granted would automatically lead to aid suspension, and a charge sheet (in the form of a Fund report posted on its website that would caution other prospective donors - bilateral as well as multilateral that no independent watchdog is carefully monitoring pledged reforms). Grace period extensions are generally premised on either exogenous mitigating factors (for example, global recession or pressure from a creditor nation like the US) or domestic factors like the floods/earthquake.
Who does Pakistan owe the most to? According to the State Bank of Pakistan we owe the maximum to multilateral donors. Thus while on 30/6/10 around 23.69 billion dollars was owed to multilaterals by 30/6/11 our debts to these entities increased to 25.8 billion dollars. The multilateral that Pakistan owes the most to is the Asian Development Bank with disbursed and outstanding debt amounting to 12 billion dollars by the end of last year. The bulk of this funding is at the market rate of interest (LIBOR plus what the bank charges as administration expenses that includes business class tickets for Bank staff and five-star hotel stays while in the country). Grant assistance agreement signed with the ADB in 2006/07 was 5 million dollars and the Economic Survey 2010-11 does not record any other grant assistance extended by the Bank since. Pakistan has neither requested nor been granted any relief with respect to its debts (principle or interest due) to ADB.
The next highest multilateral creditor is the International Development Association (IDA) to which we owed 10.7 billion dollars by 31 March 2011. However, in marked contrast to ADB, IDA, as a part of the World Bank helps the world's poorest countries, provides interest-free credits and grants for programs that boost economic growth, reduce inequalities and improve people's living conditions. The EU extended 158 million dollars in 2010-11 while IDA extended 13.4 million dollars.
The above refers to the stock of debt. What this country requires is flow of debt or in other words annual injections from external sources into our ailing economy. The most adversely affected support from external resources in the aftermath of the government's decision not to seek reactivation of the stalled SBA programme (because of failure to undertake agreed critical economic stabilization reforms) or a new IMF programme (which would provide a window of opportunity in terms of nonpayment of past loans/interest for around 6 months) would be programme loans defined as budgetary support. Last year the total budgeted was 80 billion rupees while only 39 billion rupees was disbursed (a decline attributed to the stalled SBA). This year the government anticipates 117.8 billion rupees under programme loans - a target unlikely to be achieved if the government does not go on another rigidly monitored active IMF programme.

Under external grants the amount of 34 billion rupees earmarked under the Kerry-Lugar bill would be affected for political reasons. In spite of US Secretary of State Hillary Clinton's recent visit the floodgates of pledged assistance are unlikely to be opened any time soon. The Zardari-led government, like the PPP governments of the past, is also not committed to privatisation and the 70 billion rupees earmarked as external grant (though it does appear stretching the definition of external grants) in the current year from privatisation proceeds appears unrealistic to say the least.
What is the government relying on given its borrowing potential has been severely compromised due to its own foot dragging in terms of implementing the reform agenda? The government envisages more borrowing through the issuance of Sukuk bonds by pledging national assets like highways and holding consultations with international financial institutions seeking ways of tapping foreign resources. The success of both is questionable given the failure of the Finance Ministry to adhere to an agreed reform agenda or implement an austerity programme.