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| October 25, 2001 | Thursday | Shaba'an 7, 1422 |
Reform strategy: IMF awaits Pakistan’s final move
WASHINGTON, Oct 24: The International Monetary Fund is waiting for Pakistan to finalize bilateral and multilateral financial arrangements before deciding on a reform strategy for the country under the Poverty Reduction and Growth Facility (PRGF), it was learnt here on Wednesday.
Federal Finance Minister Shaukat Aziz is due to discuss multilateral arrangements with the Paris Club later this month. The question of debt relief also depends on the outcome of the minister’s talks in Paris.
On Tuesday, the World Bank had approved credit equivalent to $300 million to help Pakistan in its privatization drive of the banking sector.
An IMF press release, reporting on talks with a Pakistan delegation, says the IMF staff held policy discussions on a medium-term economic reform strategy that could be supported under a three-year PRGF arrangement. “Fund staff is highly satisfied with the progress made towards agreement on the macroeconomic policy stance and structural reforms called for under the current difficult circumstances.
Key elements of Pakistan’s reform programme aim at improving delivery of basic social services and creating a more investor and growth-friendly environment,” the press release added. The Pakistan delegastion comprised officials who had accompanied Mr Aziz on his visit to Washington this month and stayed back after the minister had to return to Islamabad for Secretary of State Colin Powell’s visit to Pakistan.
Pakistan was said to be still discussing the bilateral and multilateral sources of external financing, needed to underpin the programme and to “help Pakistan cope with the economic and financial fallout of the events in Afghanistan, such as higher insurance costs for exports and imports, as well as weaker world demand.
Further discussions will be held with Finance Minister Aziz in Paris this week with the intention to proceed speedily toward an agreement in the period immediately ahead”.
The press release pointed out that the IMF’s concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed in November 1999 the Poverty Reduction and Growth Facility, and its purposes were redefined.
It is intended that PRGF-supported programmes will be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a poverty reduction strategy paper.
This is meant to ensure that each PRGF-supported programme is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an interest rate of 0.5 per cent a year, and are repayable over 10 years, with a 5-year grace period on principal payments.
The World Bank approval is for Pakistan’s banking sector restructuring and privatization project and the loan amount is IDA—US$300 million equivalent. The grace period is 10 years, maturing in 35 years.
The project is expected to help Pakistan continue implementation of its banking reform programme, focussed on further restructuring of the nationalized commercial banks and is meant, in the words of the World Bank, to improve the prospects for sale of such banks to qualified strategic investors and completing the privatization of the partially-privatized banks.
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