IMF chief satisfied with Pakistan

The head of IMF praised Pakistan's commitment to an $11.3 billion rescue package, despite a delay in setting up tax.

The head of the International Monetary Fund (IMF) on Monday praised Pakistan's commitment to an $11.3 billion rescue package, despite a delay in setting up a nationwide tax.

IMF managing director Dominique Strauss-Kahn said that while Pakistan could not be considered a "normal country" in light of its wave of violence, the government has made a "good step forward" on economic reforms. "There is a lot of concern but no real problem. I think they are going ahead rightly," Strauss-Kahn said in a group interview.

The IMF in 2008 approved a rescue package for Pakistan as the country struggled to cope with bloody attacks by militants, 30-year-high inflation and fast-depleting reserves. The Washington-based international lender approved the latest $1.13 billion of the package in May and allowed two waivers on conditions, including giving the government the right to overrun the budget deficit.

As part of the IMF bailout, Pakistan agreed to impose a nationwide value-added tax to bolster government coffers and drum up badly needed funding to fight poverty. But Pakistani leaders are squabbling over how to set up the tax. Some Pakistanis have voiced fear that the delay could lead to a cut-off in IMF support.

Strauss-Kahn acknowledged the IMF had "questions" about the tax and energy prices, but added: "I must say that a lot already has been delivered by the government." Another concern, Strauss-Kahn said, was to ensure that donor nations -- informally grouped as the "Friends of Pakistan" -- follow through with pledges. "The question is... does the so-called Friend of Pakistan set of countries... really deliver and provide the resources, because all the resources needed are not supposed to come from the IMF," he said.

Donors met in April 2009 in Tokyo and pledged $5.28 billion  to help stabilise Pakistan, which is the Muslim world's only declared nuclear weapons state and lies on the frontline of the US-led war on extremists in Afghanistan. The US Congress last year approved a five-year, $7.5 billion plan to build roads, schools and democratic institutions in Pakistan.