Looking for IMF help, Pakistan approaches US

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

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 1^st, 2011.