An Alternative to Imf Aid

An Alternative to IMF Aid

There is no dearth of coming and going of IMF missions in Pakistan or the visits of our financials to the IMF headquarters in Washington. A small technical mission is already here to look at the revenues and expenditure of the state and connected details. A high powered mission is expected later for financing assistance under the Poverty Reduction and Growth Facility which we are expecting to be about 2.5 billion dollars spread over three years.

Unlike our earlier expectation of the package coming up by next month that may not be available before November and that too only if it goes through the political clearance of a group of seven prior to that. While the IMF officials are concerned with the details of the financial package they ultimately draw up, the extent to which Pakistan can honor its varied commitments under that, and the manner in which Pakistan can benefit economically from that, the nominees of the group of 7 on the IMF board have to get their political clearance from their government.

One such country sympathetic to Pakistan is Japan, and its Prime Minister ___________ is to visit Pakistan nearly as a part of his South Asian tour. The importance of Japan to Pakistan lies in the fact that it has been its largest aid- giver with an annual package of 500 million dollars. But it is not ready to resume aid unless Pakistan shows strong commitment to nuclear non-proliferation. And Tokyo is insisting that India sign Complete Test Ban Treaty (CTBT) before it qualifies for its economic assistance.

IMF officials here say that it is the Paris Club donors who have to give the political approval for resumption of aid suspended since May last year. The political conditions for resumption of aid desperately needed by Pakistan are several. Some of them are very tough conditional ties, a part from signing CTBT, like handling over Osama Bin Laden to US. The others are banning some of the militant organizations within Pakistan, like Harkat-ul-Mujahideen and closing some of the alleged terrorist basis. Better relations with India and less assistance to Mujahideen in Kashmir can also be helpful. In that context the present developments in Kashmir are interesting, and how the west comes to perceive the role of Pakistan there is significant.

Meanwhile the State Bank of Pakistan have prepared an alternative plan to meet the situation if the IMF withholds the expected package and delays of unduly, says its vocal governor Ms Shamshad Akhter " if we cannot have deal with IMF, we have prepared an alternative to cope the situation". She says without disclosing the details.

Drawing up an alternative package is not easy. What matters is not only the size of that package but also its duration. Even if we get the package of 2.5 billion dollars spread over for three years it will not solve many of our problems, but only a few. But getting a certificate of good economic health or getting on to a road to good health with IMF guidance is very important for our external financial dealings.

The speculation in the country is on what kind of an alternative package it will be, and the measure of success that can be achieved assuredly? Pakistan is estimated to need six billion dollars next year primarily to meet its debt commitments after the current rescheduling of debt repayments comes to an end by this December 31. Meanwhile the seeking foreign exchange reserves have gone down below 1.2 billion dollars, while Mr. Musharraf in a statement issued abroad asserts that reserves amount merely to 700 million dollars. And yet the State Bank is forced to use some its meagre dollar reserves to prevent the rupees sinking