News / Asia

IMF Team Visits Pakistan to Check Progress on Economic Reforms

FILE - Pakistani Finance Minister Muhammad Ishaq Dar, right, shakes hands with IMF mission chief Jeffrey Franks after a joint news conference in Islamabad, Pakistan, July 4, 2013.
FILE - Pakistani Finance Minister Muhammad Ishaq Dar, right, shakes hands with IMF mission chief Jeffrey Franks after a joint news conference in Islamabad, Pakistan, July 4, 2013.
Reuters
Pakistani Prime Minister Nawaz Sharif faces the first formal test of his economic policies this week during a visit by the International Monetary Fund. It won't be easy.
 
Sharif swept to a landslide victory in May after promising to fix a sluggish economy whose growth has averaged 3 percent over the last five years. Voters are hungry for jobs while power cuts and minimal social services trigger frequent violent protests.
 
Last month, the IMF saved Pakistan from a possible default by agreeing to loan it $6.7 billion over three years, but its condition of quarterly reviews means the cash is not guaranteed.
 
A team led by the IMF's regional adviser, Jeffrey Franks, is visiting this week to see if Pakistan is trying to meet conditions intended to promote reforms.
 
The government has begun to tackle Pakistan's fiscal problems, but true success will come only when tax evaders are punished, said one Western diplomat.
 
“Their willingness to do the painful but necessary things up front suggests they're more willing to tackle this problem than their predecessors,” said the diplomat, who declined to be identified because of the sensitivity of the topic.
 
“The next six months is crunch time.”
 
Eleven out of 12 IMF programs since 1998 have been scrapped or abandoned because Pakistan failed to institute reforms.
 
“Governments have tried to ‘game’ the IMF, and achieved partial success each time,” two former Fund officials concluded in a recent paper.
 
This time around, Sharif has promised the IMF to privatize loss-making state industries, reform a faltering energy sector, expand Pakistan's tiny tax base and cut government borrowing.
 
Just 0.57 percent of Pakistani citizens paid income tax last year, contributing to one of the lowest tax-to-GDP ratios in the world, which leaves public services woefully underfunded.
 
Sharif also plans to privatize 32 state-run companies, including two huge gas companies, the state oil company, several banks, the national airline and power distribution companies.
 
During Sharif's previous term as prime minister – which was ended by a coup in 1999 - he helped successfully privatize several banks, said Muhammad Jameel, executive vice president at United Bank.
 
“Now we have a good banking sector that is about 85 percent private,” he said. “The global financial crisis hardly touched us.”
 
Pakistan's foreign exchange reserves have dwindled to about $4 billion, or the equivalent of four week's worth of imports, and several large repayments fall due in the next six months.
 
Many economists argued that the IMF loan package had aimed to save Pakistan from the consequences of its financial recklessness because the nuclear-armed nation of 180 million was considered too important to fail.
 
However, considerations over Afghanistan also matter. Western allies want to use Pakistan as a route to withdraw equipment from Afghanistan during the NATO drawdown in 2014, and are keen to ensure political stability.
 
Blackouts and Power Problems
 
Daily blackouts have crippled the economy, knocking two percentage points off annual GDP last year.
 
Sharif has started to tackle the problem by paying off government debts to energy companies and slashing populist subsidies for power, but the debts are already piling back up.
 
Potential investors worry that the country's gas and electricity regulators move at a glacial pace. Some also fear the government may hold a fire sale, with state-owned assets stripped of liabilities and sold cheaply to cronies.
 
Industrial power customers now pay higher rates, but hikes for domestic consumers are being held up by an activist Supreme Court. Rival political parties have denounced the increases.
 
“The previous government took little action over the last five years, but this one seems to be trying to come to grips with the problem,” said Jamil Masud, director of energy consultancy Hagler Bailly Pakistan. “It's unclear yet if they will or not.”

You May Like

Photogallery Oxfam: Ebola Could Be 'Disaster of Our Generation'

Meanwhile, Fidel Castro, the former leader of Cuba, says the Caribbean island nation will 'gladly cooperate' with the US in the fight against Ebola in West Africa More

Multimedia Kobani Fighting Sends 400,000 Refugees to Turkey

Refugees receive help from Turkish authorities and individuals, but say much more is needed More

India’s Ruling Nationalist Party Makes Gains in Regional Elections

Bharatiya Janata Party’s huge margin over its rivals puts it on course to form governments in the northern Haryana and western Maharashtra states More

This forum has been closed.
Comment Sorting
Comments
     
by: DbaiG
October 31, 2013 8:22 AM
Pakistan’s economy is growing. Like all other developing economies, it is also facing lots of issues. However, there are positive signs that it will continue to grow. EU has recently signed trade deal with Canada. Pakistan can also benefit from similar trade deals with other countries, especially in textile sector because country already has a good infrastructure for this industry.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Exclusive: American Joins Kurds' Anti-IS Fighti
X
Zana Omer
October 18, 2014 6:37 PM
The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video Exclusive: American Joins Kurds' Anti-IS Fight

The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video South Korea Confronts Violence Within Military Ranks

Every able-bodied South Korean male between 18 and 35 must serve for 21 to 36 months in the country’s armed forces, depending upon the specific branch. For many, service is a rite of passage to manhood. But there are growing concerns that bullying and violence come along with the tradition. Reporter Jason Strother has more from Seoul.
Video

Video Comanche People Maintain Pride in Their Heritage

The Comanche (Indian nation) once were called the “Lords of the Plains,” with an empire that included half the land area of current day Texas, large parts of Oklahoma, New Mexico, Kansas and Colorado.The fierceness and battle prowess of these warriors on horseback delayed the settlement of most of West Texas for four decades. VOA’s Greg Flakus reports from Lawton, Oklahoma, that while their warrior days are over, the 15,000 members of the Comanche Nation remain a proud people.
Video

Video Turkey Campus Attacks Raise Islamic Radicalization Fears

Concerns are growing in Turkey of Islamic radicalization at some universities, after clashes between supporters of the jihadist group Islamic State (IS) or ISIS, and those opposed to the extremists. Pro-jihadist literature is on sale openly on the streets of Istanbul. Critics accuse the government of turning a blind eye to radicalism at home, while Kurds accuse the president of supporting IS - a charge strongly denied. Henry Ridgwell reports from London.
Video

Video Syrian Defector Leaks Shocking Photos of Torture Victims

Shocking photographs purporting to show Syrian torture victims are on display at the U.S. Holocaust Memorial Museum in Washington. The museum says the graphic images are among thousands of photographs recently smuggled out of Syria by a military policeman-turned-defector. As VOA reporter Julie Taboh reports, the museum says the photos provide further evidence of atrocities committed by the government of Syrian President Bashar al-Assad against its own people.
Video

Video Drought-Stricken California Considers Upgrading Water System

A three-year drought in California is causing a water shortage that is being felt on farms and cities throughout the state. As VOA's Mike O’Sullivan reports, water experts, consumers and farmers say California needs to make changes to cope with an uncertain future.
Video

Video TechShop Puts High-tech Dreams Within Reach

Square, a business app and card reader, makes it possible to do credit card transactions through cell phones. But what made Square possible? VOA’s Adrianna Zhang and Enming Liu have the answer.
Video

Video Church for Atheists Goes Global

Atheists, by definition, do not believe in God. So they should have no need of a church. But two years ago, a pair of British stand-up comedians decided to create one. Sanderson Jones and Pippa Evans told the BBC they envisioned “something like church but without God". Their “Sunday Assembly” movement has grown from a single congregation in London to dozens of churches around the world. Reporter Mike Osborne visited with the members of a Sunday Assembly that now meets regularly in Nashville.
Video

Video Robot Locates Unexploded Underwater Mines

Many educators believe that hands-on experience is the best way to learn. Proving that the method works is a project developed by a group of students at the Stevens Institute of Technology, in Hoboken, New Jersey. They rose up to a challenge posted by the U.S. Department of Defense and successfully designed and built an underwater robot for locating submerged unexploded ordnance. VOA’s George Putic reports.
Video

Video Liberia's JFK Hospital Reopens After Temporary Ebola Exposure

JFK Hospital is Liberia’s largest and one of its oldest medical facilities. The hospital had to close temporarily following the deaths of two leading doctors from Ebola. It is now getting back on its feet, with the maternity ward being the first section to reopen. Benno Muchler has more for VOA News from Monrovia.
Video

Video Hong Kong Protests Expose Generation Gap

Most of the tens of thousands of protesters in Hong Kong are students seeking democracy. Idealistic youths say while the older generation worries about the present, they are fighting for the territory's future. VOA's Daniel Schearf reports from Hong Kong.
Video

Video Liberians Living in US Struggle From Afar as Ebola Ravages Homeland

More than 8,000 Liberians live in New York City, more than in any other city outside of Liberia itself. As VOA’s Bernard Shusman reports, with the Ebola virus ravaging their homeland, there is no peace of mind for these New Yorkers.
Video

Video Kurds See War-Ravaged Kobani As Political, Emotional Heartland

Intense fighting is continuing between Islamic State militants -- also known as ISIS or ISIL -- and Kurdish forces around the Syrian town of Kobani, on the Turkish border. The U.S. said it carried out at least nine airstrikes against Islamic State positions Friday. Meanwhile the U.N. has warned that hundreds of civilians would be massacred if the town falls to the militants. Henry Ridgwell looks at the strategic significance of the city.

All About America

AppleAndroid