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

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Bosnian Massacre Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs UN countermeasure More

UN Report Exposes Widespread Boko Haram Atrocities

Damning report graphically details pattern of vicious, widespread atrocities committed by Islamist militants 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.
Olympics Construction Scars Sacred Korean Mountaini
X
July 02, 2015 4:10 AM
Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.

VOA Blogs