LAHORE - Disillusioned and perturbed at PML-N’s deviation from its election manifesto, the business community as well as the economic experts on Friday observed that government, prior to formal agreement, had already accepted almost all conditions of the IMF for $5.3 billion loan.

“Before approaching the donor agency, the PML-N government contrary to its commitment of breaking begging bowl, not only accepted majority of the conditions but also started their implementation in the federal budget 2013-14.”

The IMF conditions already implemented in the budget 2-13-14 included power tariff hike, raise in petroleum prices, gradual end of subsidies, raise in sales tax, cut in fiscal deficit, improvement in tax-to-GDP ratio, enhancement in tax net and restructuring and privatization of public sector enterprises.

There was consensus among the major financial experts, noted economists and representatives of trade and industry on availing short-term loaning facility from IMF, saying that there is little doubt that the new government should have agreed to a multi-billion-dollar bailout from IMF as a short-term way-out. However, some experts have opposed the idea, insisting on home-ground initiatives to revive economy.

Former Finance Minister Dr Salman Shah said that the government had no other option but to approach International Monetary Fund to control its fiscal imbalances, which country has been facing due to dwindling foreign reserves, balance of payment crisis, weakening exchange rate and financial mismanagement during the last five years.

“However, this is short-term solution and borrowing a long-term loan from the IMF is not the most viable and rational option for any country,” he warned.

He observed that Pakistan’s external financing over the next two to three years requires around $10-12 billion, which can be bridged only after obtaining a bailout package from the International Monetary Fund.

Noted economist and former SBP Governor Dr Ishrat Hussain said that with a view to bridge financing gap of $5 billion, there are different medium-term solutions to fill this gap as the new government will have to generate non-debt inflows such as foreign investment and remittances or cut down trade deficit by boosting exports and reducing imports. He said that no IMF bailout package has ever been successful since 1988 due to lack of fiscal management and any solid structure for repayment.

Another financial expert Dr Farrukh Salim pointed out that in order to tackle the situation, the government borrowed an amount of $7.8 billion from IMF in 2008 under Stand-by Arrangement programme. The loan was to be repaid in different phases up till June 30, 2014.

To avail option of IMF under Extended Fund Facility (EFF), Pakistan has ensured adjustments of fiscal side to the tune of 3-4 per cent of GDP including enhancing revenues by 2 per cent of the GDP and curtailing expenditures by 1.5 percent of GDP.

PML-N Traders’ Wing SVP Abuzar Ghaffari appreciated the move, saying ‘the government had no other option’. He said that IMF loan package will pull the country out of financial crisis. He said that govt has not accepted any harsh conditions of the donor and the steps taken in the budget will have a long-term effect on economy and business environment of Pakistan. Ghaffari claimed that the new government has started implementation of all commitments made in its election manifesto.

PTA central chairman Agha Saiddain observed that $4.8 billion out of $5.3 billion IMF new loan will be adjusted which was already borrowed from the donor. Hence, Pakistan will get actually $0.8 billion in cash as the IMF will say that $4.5 billion has been adjusted of the loan already given to Pakistan.

When loan will be approved other donors will also demand pay back and will try to talk to IMF directly for adjustment as all donors have better relations, he said.

All Pakistan Business Forum chairman Nabeel Hashmi, perturbed at the new govt’s deviation from its election manifesto, said that this is not what PML-N promised the people of Pakistan. The budget has also been not in line with the promises as it contains pre-1990 regulations, controls and manipulation on business community.


Raise in petroleum rate     Already implemented in budget

Gradual end of subsidies     Implementation started in budget

Increase in sales tax     Already implemented in budget

Cut in fiscal deficit     Already implemented by raising tax

Tax-to-GDP ratio improvement    Implementation started

Enhancement in tax net     Plan to implement

PSEs restructuring, privatisation    Implementation started

Control on energy crisis     Implementation started