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

Philippines, Muslim Rebels Try to Salvage Peace Pact

Peace process faces major setback after botched military operation to find terrorists results in bloody gunbattle between government forces, Moro Islamic Liberation Front fighters More

Republicans Expect Long, Expensive Presidential Battle

Political strategist says eventual winner will be one who can put together strongest coalition of various conservative groups that make up Republican Party More

Video New Wheelchair Is Easier to Use, Increases Mobility

Engineers have come up with a lever-operated design that makes use of easily accessible bicycle technology 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.
Islamic State Prisoners Talk of Curiosity, God, Regreti
X
Zana Omer
March 28, 2015 1:19 AM
Islamic State fighter, a prisoner of Kurdish YPG forces, asked his family asking for forgiveness: "I destroyed myself and I destroyed them along with me." The Syrian youth was one of two detainees who spoke to VOA’s Kurdish Service about the path they chose; their names have been changed and identifying details obscured. VOA's Zana Omer reports.
Video

Video Islamic State Prisoners Talk of Curiosity, God, Regret

Islamic State fighter, a prisoner of Kurdish YPG forces, asked his family asking for forgiveness: "I destroyed myself and I destroyed them along with me." The Syrian youth was one of two detainees who spoke to VOA’s Kurdish Service about the path they chose; their names have been changed and identifying details obscured. VOA's Zana Omer reports.
Video

Video Germanwings Findings Raise Issue of Psychological Testing for Pilots

More is being discovered about the co-pilot in the crash of Germanwings Flight 9525 in the French Alps. Investigators say he was hiding a medical condition, raising questions about the mental qualifications of pilots. VOA's Carolyn Presutti reports.
Video

Video Hi-tech Motorbike Helmet's Goal: Improve Road Safety

In cities with heavily congested traffic, people can get around much faster on a motorcycle than in a car. But a rider who is not sure of his route may have to stop to look at the map or consult a GPS. A Russian start-up company is working to make navigation easier for motorcyclists. Designers at Moscow-based LiveMap are developing a smart helmet with a built-in navigation system, head-mounted display and voice recognition. Zlatica Hoke has more.
Video

Video New Wheelchair Is Easier to Use, Increases Mobility

Traditional push-rim wheelchairs create a lot of stress for arm, shoulder and neck muscles and joints. A redesigned chair, based on readily available bicycle technology, radically increases mobility while reducing the physical effort. VOA’s George Putic reports.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.
Video

Video Virginia Tavern Takes Patrons Back to Medieval Times

European martial arts are not widely practiced and are unknown by most people. A tavern in Old Town Alexandria, outside Washington, wants to change this by promoting these fighting techniques from medieval times. Through combining visual arts, martial arts and culinary arts, this tavern brings medieval history back to life. VOA's Yang Lin and Helen Wu report.
Video

Video Space Program Status Disappoints 'Last Man on the Moon'

One of the films that drew big crowds last week at the annual South by Southwest festival in Austin, Texas, tells the story of the last human being to stand on the moon, U.S. astronaut Eugene Cernan. It has been 42 years since Cernan returned from the moon and he laments that no one else has gone there since. VOA’s Greg Flakus reports.

VOA Blogs

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