LAHORE  - The IMF is different from other international agencies like the World Bank and the Asian Development Bank because other institutions focus on development assistance with lending for specific projects and initiatives while the IMF focuses on macroeconomic stabilization with a specific emphasis on fiscal deficits and exchange rate adjustments.

This was stated by IMF Director for Middle East and Central Asia, Mr. Masood Ahmed, during a roundtable discussion held at Lahore School of Economics here on Friday.  Macroeconomic imbalances in the economy forced Pakistan to enter another IMF assistance program, Masood Ahmed said and added that the IMF assists countries in terms of technical assistance, macroeconomic advice and lends in case of macroeconomic crises. He explained that severe balance of payments crisis that Pakistan faced in 2013 resulted into a significant reduction in its foreign exchange reserves which in turn led the Pakistani government to ask the IMF for assistance.

To a question as to why the IMF insisted on significant reductions in expenditures which mostly led to significant cut in development expenditures that could hurt long term growth, Mr. Ahmed said that one of the major issues facing developing countries like Pakistan is that they spend far more money than they collect and this leads to macroeconomic crises. The IMF recognizes that governments tend to slash development expenditures immediately, causing significant cut in spending in critical sectors like health and education. For this reason, the IMF now includes in its program a requirement that governments should maintain a certain level of spending in critical social sectors. To a question as to why the IMF insisted on increasing tax revenues, he stated that IMF never gets involved in determining specific taxes but is more concerned with the overall objective of macroeconomic stabilization.  “Pakistan has some basic structural problems which become severe every few years and requires IMF assistance, but after a year or two of the IMF program government quits this programme stops following IMF advice for long term reform.   Mr. Ahmed went into detail about the proportional voting system that exists in the IMF Board which means that larger economies have a larger proportion of the votes, but explained that most decisions taken by the IMF Board are based on a consensus between most of the members. Mr. Ahmed says that the energy crisis in Pakistan is a significant issue facing policymakers as well those interested in macroeconomic stabilization and long-term growth and that the significant fall in oil prices has been handled differently by developing countries. Some countries like Pakistan have decided to pass on a significant portion of the fall in oil prices to the final purchasers, while others like India have kept the final prices of fuel the same by increasing the taxes on these products in order to shore by their domestic revenues. Dr. Shahid Amjad Chaudhry, Rector of the Lahore School of Economics welcomed Mr. Masood Ahmed, Mr. Herald Finger, the IMF Pakistan Mission Chief and Mr. Tokhir Mirzoev, the IMF Resident Representative for Pakistan.