Presidential guarantee: Pakistan takes exception to IMF’s stipulation

Government also raises concern over meetings with other stakeholders.

ISLAMABAD:

Pakistan has accused the International Monetary Fund (IMF) of lacking an understanding of the country’s political system after the Fund attached an unusual condition for a new bailout programme – that is, the president signing the letter of intent.

As the IMF’s condition creates ripples in the power corridors, more details surface about the post-evaluation report of an $11.4 billion bailout programme.

Sources in the Ministry of Finance told The Express Tribune that the government has differed with the Fund’s recommendation. “The Fund is of the view that President of Pakistan takes every decision, thus, it would be appropriate to seek guarantees from the highest level”, said a senior ministry official on condition of anonymity.

In its comments on the IMF report, the finance ministry explained to the Fund that the president’s consent is always taken on important policy matters as the finance minister takes decisions under guidelines given by the Cabinet, prime minister and the president.

The IMF had written to Islamabad that any future bailout programme should be co-signed by the president in a bid to seek guarantees for implementing reforms at the highest level after the finance minister failed to honour commitments. It is standard practice for a recipient country’s finance minister to sign the letter of intent on behalf of the government along with the State Bank of Pakistan governor.

The fluid political situation in the country compelled the IMF to put forward the unusual condition, admitted the officials. They added that the IMF wanted to seek guarantees at the president’s level due to the upcoming general elections and the uncertainty looming over the political arena.

However, the government has reiterated to the IMF that, in case of any change of the government, it is standard practice for the new setup to own all international treaties and agreements.

According to a finance ministry official, the IMF sought the guarantees at the highest level after the commitments given by Finance Minister Dr Abdul Hafeez Shaikh were not even owned by his own government. Hafeez Shaikh was not available for comments.

After differences of opinion between IMF officials and Pakistani authorities, the Fund’s Board of Executives will review the situation.

When approached, the IMF’s Washington-based spokesman did not categorically deny that the president’s signing of the agreement was a Pakistan-specific condition.

“The IMF has not received a request for a new programme from the Pakistani authorities. We remain in a close and constructive dialogue regarding the prospects and challenges of the Pakistani economy with the finance minister, our principal interlocutor, and other members of the economic team,” said a spokesperson of the Fund without explaining the reasons for putting such an embarrassing condition.

While both the IMF and Pakistan deny holding negotiations for a new programme, the contents of the report and the IMF spokesman’s comments suggest that negotiations have been going on for some time.

Other stakeholders

The sources said Pakistan has also raised issue with the IMF delegation meeting with various stakeholders without the consent of the finance ministry and foreign office. They added that the IMF staff’s meetings with various stakeholders in the past “was a violation of defined procedures” for such meetings.

The finance ministry had also protested over IMF’s Islamabad-based representative, Paul Ross, meeting with the Punjab government without its consent. The meetings were arranged with the help of the son of the then chief secretary Punjab Javed Mahmood. Mahmood’s son is an employee of the IMF.

The IMF team also held meetings with the army chief, the opposition representatives of Pakistan Muslim League-Nawaz and Pakistan Tehreek Insaaf, as well as Muttahida Qaumi Movement in the last week of July. It was not clear whether this time the meetings were held with the consent of the finance ministry. The team also met with industrialists in Lahore.

Published in The Express Tribune, August 12^th, 2012.