Looking for the green light: Japanese investment awaiting approval of second IMF review

Country to release $2.5b for Karachi Circular Railway after appraisal.

KARACHI:

Pakistan is not the only country that eagerly awaits the approval of the second review of the International Monetary Fund’s (IMF) Extended Fund Facility (EFF), due by its executive board till the end of March.

The future of the $2.5 billion Karachi Circular Railway (KCR) project, to be funded by Japan, also depends on the IMF’s verdict on Pakistan’s economic performance.

“Japan is considering funding the KCR but it is eagerly waiting for final approval of the second review by the IMF,” Japan Ambassador to Pakistan Hiroshi Inomata told The Express Tribune on Tuesday evening.

When asked how important IMF’s report is, Inomata said that IMF’s green signal is very crucial to Japan and it is aware that the Pakistan government has been attaching a great deal of importance to the KCR as well.

According to the ambassador, besides KCR, Japan and Pakistan can collaborate in energy, food and agriculture sector and infrastructure projects.

Federal Minister for Railways Khawaja Saad Rafique has been pursuing Japan International Cooperation Agency (JICA) for a $2.5-billion loan for KCR. On his visit to Karachi in November last year, he informed that the JICA has promised to extend the required loan for KCR.

The IMF’s staff mission met Pakistan’s top economic leadership in Dubai from February 1-9, 2014 for the second review of Pakistan’s EFF program. After discussions, the IMF said it was encouraged by the overall progress made in pushing ahead with policies to strengthen macroeconomic stability and reviving economic growth.

However, the staff-level understanding reached between the IMF and Pakistani officials was subject to approval of the IMF’s Executive Board. Upon approval, the IMF will release around $550 million to Pakistan.

Pakistan-India trade

We support Pakistan’s efforts to improve bilateral trade between India and Pakistan and hope that the relations of the two neighbours will improve in the near future, said Ambassador Inomata.

“It (liberal trade) is good for this region. We believe neighbours need to get along with each other,” Inomata said on liberal trade between India and Pakistan. “This will also reduce defence spending and the two countries can focus on infrastructure development and other challenges.”

Security issues

Unfortunately, the biggest hurdle to Japanese investment to Pakistan is the security situation of the country, he said, adding that Japan appreciates the focus of the present government on security and hope that it will improve the security situation.

“Japanese investors are waiting for the right time to invest in Pakistan,” he said while replying to a question. “But security concerns in different parts of country are holding them back.”

Published in The Express Tribune, March 20^th, 2014.

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