ISLAMABAD: Wary of inadequate reforms and under-utilisation of resources, the International Monetary Fund (IMF) now wants Pakistan’s president to endorse any new bailout programme.
“Active political support is required at the highest level to implement essential reforms in Pakistan,” said IMF’s post-evaluation draft report for a new $11.3 billion bailout programme.
“It will be worth while to consider the president for co-signing the letter of intent (for any future arrangement).”
A letter of intent (LOI) states the policies a borrowing country intends to implement with the help of its requested financial assistance.
It is standard practice for a recipient country’s finance minister to sign the LOI on behalf of the government and the SBP governor. A former SBP chief reiterated that presidents never sign letters of intent.
The LOI signed in 2008 was administered by then finance minister Shaukat Tarin and former State Bank governor Shamshad Akhtar.
The programme met an untimely end in 2010 with two tranches worth $3.4 billion not disbursed due to Pakistan’s in ability to honour written commitments. The reforms were related to general sales tax and ensuring fiscal consolidation and autonomy of the State Bank of Pakistan.
An IMF delegation is also said to have held an informal meeting with Chief of Army Staff General Ashfaq Parvez Kayani. The delegation has sought guarantees for implementing crucial reforms in case Islamabad decides to initiate another programme with the Fund, credible sources in the finance ministry told The Express Tribune.
Analysts, however, find the IMF’s move repulsive. They feel the decision undermines the country’s economic managers and is an insult to the office of the president.
“Asking the president to co-sign the letter of intent is not only an insult to the country and the office of the president, it also means the IMF has no confidence in the finance minister and his ability to deliver,” said Dr Ashfaque Hasan Khan, a former special secretary of the finance ministry.
The ministry’s spokesman Rana Assad said he was not authorised to deliberate over the contents of the post-evaluation report, adding the finance secretary might be in a better position to respond to related queries. The finance secretary, however, was not available for comments.
The IMF headquarters’ response is also awaited on the same.
A senior finance ministry official blames Finance Minister Dr Abdul Hafeez Shaikh for the ‘embarrassing situation’.
“Dr Shaikh showed the president’s door to the IMF during the fourth review of the last unsuccessful programme in Doha (Qatar). The minister advised IMF’s mission chief to meet the president personally regarding assurances on implementation of reformed general sales tax. Shaikh and the chef de mission then flew to Islamabad to meet the president,” said the official requesting anonymity.
In accordance with the IMF’s cautious stance, a delegation of the Fund comprising its Middle East and Central Asia Director Masood Ahmed and new mission chief for Pakistan Jeffery Franks held meetings with various powerhouses in the last week of July.
While IMF’s meeting with the chief of army staff is said to be the most important in the string of huddles, the delegation also met with PML-N Senator Ishaq Dar, Jehangir Tarin of the PTI, and MQM’s Farooq Sattar.
Pakistan is eager to explore the possibilities of another IMF programme, but the IMF is reluctant to enter into any agreement with an interim setup.
Published in The Express Tribune, August 9th, 2012.