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

Egypt's Suez Canal Dreams Tempered by Continued Unrest

Seen as a potential driver of recovery, Cairo’s plan to expand waterway had been raising hopes to give country much needed economic boost More

Ebola Maternity Ward in Sierra Leone First of its Kind

Country already had one of world's highest maternal mortality rates before Ebola arrived, virus has added even more complications to health care More

Malaysia Flight 370 Disappearance Ruled Accident

Aircraft disappeared on March 8, 2014; with ruling, families of 239 passengers and crew can now seek compensation from airline 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.
Super Bowl Ads Compete for Eyes on TV, Webi
X
January 29, 2015 9:58 AM
Super Bowl Sunday (Feb. 1) is about more than just the NFL's American football championship and big parties to watch the game. Viewers also tune in for the world famous commercials that send Facebook and Twitter abuzz. Daniela Schrier reports on the social media rewards for America’s priciest advertising.
Video

Video Super Bowl Ads Compete for Eyes on TV, Web

Super Bowl Sunday (Feb. 1) is about more than just the NFL's American football championship and big parties to watch the game. Viewers also tune in for the world famous commercials that send Facebook and Twitter abuzz. Daniela Schrier reports on the social media rewards for America’s priciest advertising.
Video

Video Theologians Cast Doubt on Morality of Drone Strikes

In 2006, stirred by photos of U.S. soldiers mistreating Iraqi prisoners, a group of American faith leaders and academics launched the National Religious Campaign Against Torture. It played an important role in getting Congress to investigate, and the president to ban, torture. VOA's Jerome Socolovsky reports.
Video

Video Freedom on Decline Worldwide, Report Says

The state of global freedom declined for the ninth consecutive year in 2014, according to global watchdog Freedom House's annual report released Wednesday. VOA's William Gallo has more.
Video

Video As Ground Shifts, Obama Reviews Middle East Strategy

The death of Saudi Arabia’s king, the collapse of a U.S.-friendly government in Yemen and a problematic relationship with Israel’s leadership are presenting a new set of complications for the Obama administration and its Middle East policy. Not only is the U.S. leader dealing with adversaries in Iran, the Islamic State and al-Qaida, but he is now juggling trouble with traditional allies, as White House correspondent Luis Ramirez reports.
Video

Video MRI Seems to Help Diagnose Prostate Cancer, Preliminary Study Shows

Just as with mammography used to detect breast cancer, there's a lot of controversy about tests used to diagnose prostate cancer. Fortunately, a new study shows doctors may now have a more reliable way to diagnose prostate cancer for high risk patients. More from VOA's Carol Pearson.
Video

Video Smartphones About to Make Leap, Carry Basic Senses

Long-distance communication contains mostly sounds and pictures - for now. But scientists in Britain say they are close to creating additions for our smartphones that will make it possible to send taste, smell and even a basic touch. VOA’s George Putic reports.
Video

Video NASA Monitors Earth’s Vital Signs From Space

The U.S. space agency, NASA, is wrapping up its busiest 12-month period in more than a decade, with three missions launched in 2014 and two this month, one in early January and the fifth scheduled for January 29. As VOA’s Rosanne Skirble reports, the instruments being lifted into orbit are focused on Earth’s vital life support systems and how they are responding to a warmer planet.
Video

Video Saved By a Mistake - an Auschwitz Survivor's Story

Dagmar Lieblova was 14 when she arrived at Auschwitz in December 1943, along with her entire Czech Jewish family. All of them were to die there, but she was able to leave after several months due to a bureaucratic mix-up which saved her life. Now 85, with three children and six grandchildren, she says she has a feeling of victory. This report by Ahmad Wadiei and Farin Assemi, of RFE/RL's Radio Farda is narrated by RFE’s Raymond Furlong.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid