Looking for IMF help, Pakistan approaches US

Published: November 1, 2011

Islamabad publically denies a return, privately begs the US for help in seeking a second IMF programme. PHOTO: FILE

ISLAMABAD: 

They have said publicly that they do not need it. They have denied vociferously any reports that suggested they may ask for it. But privately, Pakistan’s top economic managers have been pleading with the United States to assist Islamabad in seeking a second bailout from the International Monetary Fund, after having exited the last one early on account of not having fulfilled its conditions.

Sources in the finance ministry told The Express Tribune that top government officials made the request during the most recent visit by US Secretary of State Hillary Clinton to Islamabad. Last Friday, the matter was also taken up by Finance Minister Abdul Hafeez Shaikh during his meetings in Washington with the US Treasury Department.

Pakistan has reportedly begged the US to ‘influence’ the IMF to relax some of its tough preconditions to a second bailout (which will likely include many of the same provisions Islamabad was unwilling to meet with the first one, which it got in late 2008).

Predictably, Washington has turned down Islamabad’s request. “Shaikh was rebuffed by the officials at the US State and Treasury Departments. They instead asked him to satisfy the IMF [conditions] and not to look towards the US for [special] favours,” said one senior government official.

The US Embassy in Islamabad confirmed that the United States was not interested in intervening in the spat between the IMF and Pakistan. “It not standard practise for Washington to intervene in IMF affairs and the Fund takes its decisions independently,” said Mark Stoh, the embassy spokesperson.

The $11.3 billion bailout that Islamabad had signed on to in November 2008 ended on September 30 with the last two tranches of about $3.4 billion undisbursed. The IMF had refused to release them after Pakistan failed to meet the conditions of fiscal and energy sector reforms. Nonetheless, despite upcoming repayments of $1.4 billion due on February 24, 2012, the finance ministry has insisted that the country would not need a second IMF bailout.

However, in his testimony before the Senate Finance Committee on October 11, Finance Secretary Waqar Masood admitted that the country’s external balance of payments had come under pressure earlier than expected – in the first quarter of the fiscal year ending June 30, 2012, as opposed to the third or fourth as anticipated by the government.

Shaikh was in the US to participate at a conference organised by Harvard University in Boston, where he was a keynote speaker. He met with US Deputy Treasury Secretary Neal Wolin and Deputy Secretary of State for Management and Resources Thomas Nides in Washington on Friday.

Sources said that, in addition to the IMF bailout, the ministry also raised the issue of Coalition Support Funds (reimbursements the US military pays to Pakistan for services rendered). Washington has withheld about $3.4 billion in such funds. Islamabad had estimated it would receive at least $1.4 billion during the course of fiscal year 2012, but has so far received nothing.

Islamabad seems to be betting that the US cannot afford a bankrupt and economically dysfunctional Pakistan, said one senior finance ministry official, adding that international lenders appeared to have developed a consensus to try to keep the Pakistani economy afloat. Financial institutions appear worried at the fact that economic reforms have stalled since the suspension of the IMF programme.

Government officials are scheduled to meet the IMF in Dubai as part of the regular ‘Article IV’ discussions, a process the Washington-based lender uses to regularly assess the health of its member states’ economies and forestall crises. However, observers believe that Islamabad will use that opportunity to discuss the parameter of the next IMF bailout.

Published in The Express Tribune, November 1st, 2011. 

Reader Comments (56)

  • Malik
    Nov 1, 2011 - 9:13AM

    More debts to pay the debts back. lol

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  • ashok sai
    Nov 1, 2011 - 9:24AM

    Finance managers should ask Haqqani brothers to negotiate with IMF.

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  • Ashraf P
    Nov 1, 2011 - 9:30AM

    No IMF loans, no US aid !!
    What happened to that decision??

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  • Cautious
    Nov 1, 2011 - 9:33AM

    Islamabad seems to be betting that the
    US cannot afford a bankrupt and
    economically dysfunctional Pakistan

    Maybe it’s time to wake up and smell the roses. It should be obvious to some that you are already bankrupt and have been dysfunctional for some time. You have pounded your chest and shouted your anti America slogans – you don’t want there money – you don’t want their help. it’s time to step up to the plate.

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  • Khalid
    Nov 1, 2011 - 10:05AM

    Country would remain stuck in this vicious cycle unless it performs its own share; sharpen an economic vision, resolve to manage economy beyond politicking and increase tax to GDP ratio. Holiday season of avoiding one’s due economic role would end sooner or later; be it Greece or Pakistan.
    It is a disgusting economic option that international community cannot afford to have a bankrup Pakistan, so they ll help! Wao..

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  • Ahmer Ali
    Nov 1, 2011 - 10:06AM

    @ashok sai:
    I agree with you not only 100% but even 1000%.

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  • Nov 1, 2011 - 10:17AM

    Washington is absolutely right in refusing to help Pakistan after all the things Pakistan has done in the recent past.

    Pakistan will not act against anti-US elements on its own soil but wants favours from the US? Pakistan will openly ally against the US with China but wants US help to pay its own bills? If China is such a big ally why cant it lend some change from its massive reserves which go well beyond $ 1 Trillion?

    A couple of BIllions from a reserve of more than $1000 Billion is small change to be spent for such an important ally like Pakistan?

    When China is not willing to help, Pakistan has to really introspect is it a smart move to alienate the one ally which has been so generous with Pakistan?

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  • Su 30MKI
    Nov 1, 2011 - 10:17AM

    its ok for pakistan to beg down the knees to americans to ask for IMF aid(they still curse from behind, thats a different story to talk), but will never give india a MFN status( though we give them long back 1998), who is seeking for trade..Only pakistanis understand pakistanis..

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  • Som
    Nov 1, 2011 - 10:18AM

    @ashok sai:
    Yes, with nuclear bums in their hand

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  • Shyam
    Nov 1, 2011 - 10:23AM

    No problem, if you dont have electricity you can always burn more american flags to keep you warm and for lighting up your roads

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  • Not me
    Nov 1, 2011 - 10:26AM

    Just bring about efficiency in FBR and revenue collection can double in one year.

    Why not invoke Exchange of Information clause in over 80 Conventions and Agreements on Avoidance of Double Taxation Treaties that Pakistan has executed with over 80 countries and seek information about Bank accounts and assets held by Pakistanis in those countries

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  • sam
    Nov 1, 2011 - 10:28AM

    what happened to Islamabad tall claims!

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  • malik
    Nov 1, 2011 - 10:38AM

    On the one hand, you organize public demonstrations against US. Anti-Americanism is an all-time high now.

    And you go to US expecting to bail you out so that you can live another day and resume the US-bashing? This is the height of duplicity. I hang my head in shame to read this.
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  • Ashar
    Nov 1, 2011 - 11:59AM

    Now Imran Khan’s show will be used to scare the west of the worst to come and get the bailout package.

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  • Realistic
    Nov 1, 2011 - 12:06PM

    There was debate yesterday on one TV Channel, can the China be the replacement of US?

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  • Soho
    Nov 1, 2011 - 12:14PM

    How come our “friend for all seasons” doesn’t come to the rescue? How many times has America come to our rescue! But still we don’t appreciate that. My question to anti-American people is, with all these facts infront of you, do you still think America wants Pakistan’s destruction? So, who’s the friend now!
    Pakistanis for America.

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  • gp65
    Nov 1, 2011 - 12:22PM

    “Islamabad seems to be betting that the US cannot afford a bankrupt and economically dysfunctional Pakistan, said one senior finance ministry official”

    Let us review facts:

    1) Circular debt (large part of it is by one government entity to another) causes hours of load shedding across the country. Farmers cannot irrigate their farms because tube wells do not work, workers are unemployed as factory close down and students find it difficult to study.”

    2) Out of 506 railway locomotives only 70 are functional. The government does not have money to repair the rest.

    3) Railways could not pay their pensions because the check provided to railways for payment of pension bounced.

    4) The government does not have money to pay for enough imported oil for electrcity in winter, so it plans to divert gas to residential customers and deny gas to industry for 2 months.

    If this is not de facto bankruptcy, please describe what a government bankruptcy looks like to you.

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  • manzoor
    Nov 1, 2011 - 12:33PM

    Wait Imran Khan will pull country out of financial mess !!!Recommend

  • Sanjay Sharma
    Nov 1, 2011 - 12:58PM

    No one is permanent friend or foe in the world diplomacy. Only national interests come first. Pakistan must understand that Americans will always do things for their own interests, So will the Chinese do. India & Pakistan should seek better counsel and start doing the right things which could be in their own interest. They should start behaving properly with each other and embark on a journey for nation building and create conducive atmosphere in the region. Otherwise both India & Pakistan will continue to seek help from either of the two powers for petty gains , however bad and shameful it could be for common citizenry in the long run.

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  • Realist
    Nov 1, 2011 - 1:57PM

    @manzoor:

    Mr. Sarcasm, can you give tell us whom to vote for in the coming elections if not Imaran Khan? Go ahead, try. Come on, you can do it.

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  • Hedgefunder
    Nov 1, 2011 - 2:32PM

    Once a beggar, always a beggar !!!!
    Talk about being most duplicitious Nation in the world !!
    Time the people of pakistan were educated in the actual state of affairs of their Nation, rather than how great they are and they don’t need Aid from anyone !!!!
    I don’t see the Chinese coming forward with any money to help out their best friends !!!Recommend

  • Realist.
    Nov 1, 2011 - 2:33PM

    Imran Khan , shall we ask for aid or not ? :P
    or get bankrupt ? :P
    It only looks good in speeches NOT in reality!
    WE DO NEED AID , WE DO NEED LOANS!!

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  • Sani Bhagwan
    Nov 1, 2011 - 2:45PM

    Chinese with trillions of foreign reserves could foot the bill in a jiffy, $10 billion is peanuts for them. But who cares, whats that friendship song again. “Our friendship is taller than Himalayas, Deeper than oceans, Stronger than steel, Sweeter than honey”. Try appending few more lines to that song, like “Its colder than Antarctica, Hotter than Volcano”. May be they will help.

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  • Nov 1, 2011 - 2:52PM

    More debt will sove our debt problem. It is like getting drug addiction treated with more drugs.

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  • It Is Economy Stupid
    Nov 1, 2011 - 3:15PM

    Pakistan does not need IMF loan all it has to do is manage its own budget. Cancel that expensive stealth missile. Cost of one such missile will cover the pay of all of its railway workers.

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  • Adil
    Nov 1, 2011 - 3:51PM

    Its a RAW CIA MOSSAD conspiracy to humiliate Pakistan. Ya Allah Khair

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  • Pakistani
    Nov 1, 2011 - 4:28PM

    TO PAKISTANIS :: Why we all Pakistanis talk about Pakistan like it is something outside our own existance? We ALL make what Pakistan is. The country is full of wealth and resources. It has been blessed with wise minds and very capable physical human resources.

    What is wrong is the absence of selfless, honest and dedicated thoughts and efforts. Not for individual selves/family BUT for EVERYONE.

    First myself and then other Pakistanis…. We need to work on this INDIVIDUALLY. Nothing will happen if we struggle for another 10 years or so. Believe me, if everyone of us start thinking outside our own limited selves, we will overcome ALL our issues….

    And this spirit should not just then be limited to just our own country, we must widen our borders to all….

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  • Devils Advice
    Nov 1, 2011 - 5:59PM

    Regarding Comments from Indian here

    STOP Appeasing here ,There is no AMAN KI ASHA here ,Dont think Bhai Bhai relationship with Pakistani. Pakistani still lives in their own world,They think that some Angel will come on LAND OF PURE and with Magic Wand ,will change face of Pakistan.
    It is good that USA taking STERN action against Pakistan,They need to realised that you can not have duel face ,Accept responsiblity and straighten out your act ,
    NOT CHINA or USA will help pakistan to survive ,They have to learn of their own.
    Once they realise then all this boasting ,Excessive Pride ,SKY HIGH EGO will evaporated instantly.
    Just heard Imran’s clip ,Waiting to see how he can pull pakistan out of misery with just HOLLOW WORDS. It is easy said then done.

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  • noname
    Nov 1, 2011 - 7:57PM

    how can we believe our country has actually indigenous manufactured Hatf-4 missiles as claimed by govt when we dont have money to keep economy?

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  • allasia
    Nov 1, 2011 - 8:56PM

    Everyone, please repeat after me this mantra. ‘No to IMF, but yes to China, No to America but yes to China, No to India but yes to China, No to the World but yes to China’. There you go, all problems solved.

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  • allasia
    Nov 1, 2011 - 9:00PM

    My dear no name, if you have looked carefully at the Haft4 missile you would have noticed the remarkable similarities between it and the similar missiles of the Chinese. Hatf4 is nothing but a slightly modified (to fool the world by the Chinese as Pakistan is incapable of even that) and repainted (yes by Pakistan, I give you that) Chinese missile!

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  • Amren
    Nov 1, 2011 - 10:24PM

    Dont worry guys, China will help but not w/o extracting its pound of flesh. As for IMF, Zardari and co. are smart and want to get as much $$ they can to move out with the thought that they might not come back to power again.

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  • ali
    Nov 1, 2011 - 10:54PM

    ..what a shame…Recommend

  • R S JOHAR
    Nov 1, 2011 - 11:18PM

    Without IMF aid Pakistan would collapse. It does not have money to pay salaries even to their defence personnel.

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  • Meekal Ahmed
    Nov 1, 2011 - 11:55PM

    The US has clout in the IMF because it makes the biggest contribution to IMF quota’s and has the largest vote. But the US cannot pull a rabbit out of a hat. They can call the IMF MD and ask her to “go easy” on us to which the IMF MD will say, or should say, quite simply and in plain language that any new program for pakistan must contain as a PRIOR ACTION the things they did not do the last time when they took the money and ran.

    The Chinese do not give us balance of payments support which basically translates into CASH. It is true that now and then they have made a (secret) deposit in our state bank to shore up our reserves. But they would be foolish to deposit large sums of money unless we can give them an offer they cannot refuse. In other words: it will be CONDITIONAL lending.

    There is no free lunch is this world, folks. Some contries may be more transparent with what they want from us in return. And some lending institutions have conditionality built-in.

    But no country will give you a paisa for nothing.

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  • You Said It
    Nov 2, 2011 - 12:04AM

    To all the patriotic Pakistani analysts, this should serve as a reminder, as Hina Khar was reminded on her last visit to the US. Khar said to one of Hillary’s staff that the “US needs Pakistan more than Pakistan needs the US”, and he promptly replied, “No, madam, we don’t.”

    Pakistani security establishment’s policies have killed off investment and economic growth. Pakistan can shout itself hoarse on sovereignity and ghairat, and its all-weather friendship with China, but the fact is that China is unwilling to provide financial support Pakistan needs. The US is a truly generous and kind friend to Pakistan, while Pakistan continues to rile up anti-American sentiment in its masses. US and India continue to patiently engage Pakistan peacefully in spite of its recidivist policies, while Pakistan continues to damage itself and its neighbors in search of a non-existent security depth.

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  • Aslam Baig
    Nov 2, 2011 - 1:04AM

    Why US help for IMF loans? Where is our all weather friend China? Our friendship with China is deeper than ocean and higher than sky, isn’t that right ? Or we should ask our aka ISI/Haqaanis to negotiate with IMF. I am very sad to see sorry state of my country.

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  • Hedgefunder
    Nov 2, 2011 - 1:31AM

    @Amren:
    don’t bank your laurels on the chinese, as they never put good money towards bad deals where likelyhood of repayments are slim !!!!
    Without uncle sam , the land of pure is in mother of all troubles!!!
    I notice that the brother arabs and especially saudis have not come forward to offer any assistance !!!
    Forget iranians as their economic problems are very serious too!!
    So who else is left for the Begging round this time???

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  • Freeman
    Nov 2, 2011 - 2:08AM

    @ashok sai: Please indians stop this cry. We Pakistani doe snto want any type of IMF or any other Loans. This Zardari PPP govt. is eating money like a raw. Zardari and theri close ally wants only IMF loans as they do not want to collect Taxes from the Rich people.

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  • ali
    Nov 2, 2011 - 4:53AM

    @It Is Economy Stupid:
    what missile ? another Indian appeaser

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  • MarkH
    Nov 2, 2011 - 5:42AM

    @Freeman:
    Want and need are two very different things.

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  • RajX
    Nov 2, 2011 - 6:32AM

    If Imran is not willing to bail out Pakistan, there is always the all weather friend china. The “all weather” friend hopefully is truly a “all weather” friend. Friendship has to go through an acid test in trying times.

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  • RajX
    Nov 2, 2011 - 6:34AM

    I think the fireworks will start when the govt is unable to pay the salary of the army folks. Other non army govt functionaries do not matter.

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  • Abba Jee
    Nov 2, 2011 - 8:52AM

    Please look at the financial position of Pakistan vis a vis India on IMF’s official website..

    http://www.imf.org/external/np/fin/tad/exfin2.aspx?memberKey1=760&date1key=2011-11-02

    http://www.imf.org/external/np/fin/tad/exfin2.aspx?memberKey1=430&date1key=2011-11-02

    India: IV. Outstanding Purchases and Loans: None

    Pakistan: IV. Outstanding Purchases and Loans: SDR Million %Quota
    Stand-by Arrangements 4,936.04 477.51
    Emergency Assistance 296.98 28.73
    ECF Arrangements 318.72 30.83

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  • Anwar Khan
    Nov 2, 2011 - 9:07AM

    Why not ask our “all weather time-tested” friend China to share some its trillions at our time of needs? The fact is China will not do it. China wants to mass its wealth at our expense exporting cheap goods and compete with our manufacturers. Ask Pakistani garment and textile manufacturers how successful they are in exporting their products to China.

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  • numbersnumbers
    Nov 2, 2011 - 9:19AM

    Pakistan has the absolute lowest tax to GDP ratio because the Super Rich Pakistani Elite make sure that they pay no taxes at all! Flood releif crisis, lets ask the world for “aid” rather than actually tax the agricultural sector where all the money is! Recommend

  • Raj - USA
    Nov 2, 2011 - 9:30AM

    Pakistan has choices:
    1) Cozy up with USA. This would give economic benefits but damage Kashmir cause.
    2) Cozy up with China. China would want military bases in NA and FATA, to be expanded to other regions, such as, Baluchistan, Punjab and Sind. This would be advantageous for both Pakistan and China as China can encircle India and help Pakistan snatch Kashmir from India. It would be easy to communicate with China as Chinese shall become one of Pakistan’s official languages soon. Establishment may not be happy as they may loose their influence over the all imposing Chinese control.
    3) Cozy up with Saudi and start war with Iran. Saudis and all Gulf Countries shall pour unlimited money as they did to Iraq during its war with Iran. It may also help Pakistan to gain Iran’s part of Balochistan. In any case, Iran is not in a position to support Pakistan financially as much as Saudis and other Gulf Countries can. Pakistan can also introduce Pakistani Rial or Dinar instead of Rupee. Rupee has much less glamour as it is used by the poor countries, such as India and Bangladesh. Quaid’s picture can be replaced by the picture of the monarch of the country that offers the highest bid. The Establishment will also be happy as they can be gainfully employed.
    4) Cozy up with India and make the status quo boundary legal and permanent. This would not change the ground realities as Pakistan can never get Kashmir from India by force. Pakistan may not get Kashmir but may avoid loosing Balochistan. Good relations with India would also assure Pakistan that India shall not mis-use its control of water resources. The army will be unhappy as most of it would become unnecessary. So, this is the lease preferred choice.

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  • Observer
    Nov 2, 2011 - 12:19PM

    @Meekal Ahmed:

    “But they would be foolish to deposit large sums of money unless we can give them an offer they cannot refuse. In other words: it will be CONDITIONAL lending.”

    The word is that Pakistan has been trying to see parts of Gilgit/Baltistan/NA to China for cash.

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  • R S JOHAR
    Nov 2, 2011 - 12:45PM

    @noname
    Agreed, its ironical that a country which has power shortages, few funds to spare for education, healthcare, infrastructures, roads and even paying salaries to its govt employees, spends billions on nuclear arsenal and its delivery system that it can never use except keep them as a deterrent measure which could have been restricted to a small quantity and this wasteful expenditure spent for its failing economy.

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  • Bilal
    Nov 2, 2011 - 1:38PM

    The IMF bailout is one vicious cycle that we really need to get out of…for Pakistan to grow as a properous state with its policies directed at alleviating the condition of the people of Pakistan. We need to make our own policies considering the ground realities and our strengths rather than take up their one-size-fits-all solutions. The sooner the govt realizes this, the better.

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  • trulyindian
    Nov 2, 2011 - 4:45PM

    Sometimes accepting your mistakes and swallowing your pride is a sign of strength not weakness.Recommend

  • Nov 2, 2011 - 7:08PM

    IMF and other instuations of the world and their hiden aim is controal to those countries who are the ecnomicaly week in all over the world so it mean that international imperialism
    would like to dominate the underdvolping countries.

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  • Usman
    Nov 2, 2011 - 8:02PM

    I pray to God that all foreign aid is denied to Pakistan. The government tells you that they’ll go bankrupt without aid – and we start thinking “let’s get real, we do need aid”. Seriously – get real. How gullible can you get? This aid goes nowhere except in our corrupt administration’s pockets. The country will be no different without aid. The only change will be that we will have a bunch of disappointed thiefs in our government. And I pray for their disappointment.

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  • Hedgefunder
    Nov 2, 2011 - 8:13PM

    @nazir alam:
    Just remember Bodies like IMF, ADB, WB do not come running to you guys offering monies!!!
    Its the countries that approach them for assistance.
    In normal world there are always terms and conditions on any form of loans, however in case of Pakistan, well they simply can not fulfill these obligations, hence the problems for the Nation !!!!
    It is not a god given right of Pakistan to be serviced by rest of the global community in providing money and aid !!!
    Where are your brother Arabs or those all weather friends ????
    I don’t see any cheques flying into Islamabad at present !!!!

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  • Arjun
    Nov 3, 2011 - 5:57AM

    Strategic depth turned down Pakistan’s loan application…so, they’re back to the US…Recommend

  • Persian
    Nov 9, 2011 - 2:19AM

    @Raj – USA:
    It is loose(not strong) OR lose(not in possession). God bless USA.

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