THE federal government and the IMF are going to meet Friday in Turkey to discuss a range of issues, including the disbursement of the next tranche of their loan programme, amounting to $850 million. Led by PM's Finance Adviser Shaukat Tarin, the government is expected to plead to the Fund that, given the current situation of liquidity in the money markets, the conditions on the interest rates should be relaxed. For about four years or so, the State Bank of Pakistan has embarked on a policy of tightening the money supply. The idea was to counter excess liquidity to counter inflation. Of late, this policy was further pursued, this time not because of an indigenous government decision, but because of an IMF condition for its loan programme. In fact, by this point in time, the government, faced by pressures from the local business community, thought it was time to loosen the policy rate. The argument against the high rates was simple: in an effort to counter inflation, raising the interest rates is going to hamper access to credit, this raises the costs of doing business and, counter-productively, fuels inflation. It remains to be seen whether the Fund can be persuaded. Inside circles talk about real interest rates: the difference between rates of interest and inflation, going by which, the interest rates aren't high enough. Whether this is a marginal fringe within the international financial institutions remains to be seen. The withdrawal of subsidies is yet another issue that is going to be discussed. It remains to be seen whether the IMF insists on the subsidies being removed because that is what it thinks about subsidies in general, or whether it is an issue of better curtailment of fiscal deficit. It is sad for the government to be pleading its case to an outside agency for its economic policies. True, the fiscal recklessness of the previous regime has left this one at the disposal of Fund, but the incumbents should work hard to get out of the web as soon as possible.