WILL it be a tall order for the government to carry out a set of reforms to qualify for the much-sought-after Poverty Reduction Growth Facility (PRFG) and new concessional lending from the major international donors.

The IMF seems favourable to consider the PRGF at its next executive board’s meeting in Washington on December 5 or 6. Now there is no denying the fact that the Fund officials had been prevailed upon by the Bush Administration to extend what is being termed substantial package to Pakistan under the PRFG following Islamabad’s decision to support US led coalition in Afghanistan.

Nevertheless Fund’s officials especially its managing director has contradicted reports originally emanating from the ministry of finance that the size of the PRGF will be roughly 2 to $2 to 2.5 billion. Finance Minister Shaukat Aziz was the first who hinted at the possibility of getting a new loan of this amount replacing Standby Agreement that ended on September 30.

The World Bank and the IMF are expected to be favourable to Pakistan because of Washington’s increased political interests in this country. But both these institutions have started saying that Pakistan will have to implement various reforms which had not been considerably given due weight during the last two years.

The Pakistan government is believed to have been informed by both the donors that while structural reforms had been implemented to some extent, a lot is still to be done to ensure transparency, good governance, implementation of civil service and banking sector reforms, eradication of corruption, devolution of real powers at grass-root level, accelerating privatisation process, bringing improvements in the stock market and creating favourable environment for local and foreign investment.

The IMF is asking for further narrowing down the trade deficit, increasing exports, improving revenues, removing remaining subsides including in the agriculture sector and providing level playing field to all so that multinational companies operating in Pakistan should feel comfortable and continue investing in the country. The World Bank is reportedly disappointed over the delay in the approval and implementation of civil service reforms.

The bank appreciates that civil service act has been amended to enable the government to mange the service more efficiently, including the implementation of an exit strategy for staff who have completed 25 years of service or do not have the required skills. But the delay in finalising the issue by getting it resolved with the support of the provinces is not going well with the bank. The World Bank had earlier approved and disbursed $350 million structural adjustment credit (SAC) to help remove Pakistan’s balance of payment difficulties. Now the government is once again reportedly seeking SAC-2 of the same amount. It is also expecting to have $300 million for financial and banking sector reforms. The issue was discussed with Vice President World Bank Ms. Mieko Nishimizu who is still in Islamabad on a 10-day visit. What is the response of Ms. Mieko about new funding being sought by the government is yet to be known. Apparently, the bank looks sympathetic but generally the officials of the ministry of finance admit that unless Pakistan implements various conditionalities, the bank may not be forthcoming to offer increased funding.

The bank is of the view that Pakistan’s economy faces some of the serious challenges and risks due to various internal and external factors. It believes that there is an urgent need to restore business confidence and build a sound basis for economic growth and for poverty reduction, effective economic reforms are needed across a wide range of sectors. According to the World Bank officials, it requires a commitment to undertake macro economic and structural reforms and that the risk of reversal of reforms, particularly of the far reaching governance reforms and proposed devolution plans - remains and that there is no clear indication of who will be the standard-bearer of these fundamental institutional reforms.

“The bank officials are going through our Poverty Reduction Strategy Paper (PRSP) which has now been updated and would lay a a basis for seeking increased funds”, an official said. He said that there were some of the genuine problems in implementing a set of reform programmes prescribed jointly by the World Bank, the IMF and the Asian Development Bank(ADB). “For example still things are far from being over relating to banking sector reforms, although some beginning has been made. Then the failure in restructuring the Central Board of Revenue is causing problems”, he said adding that the restructuring of the state sector corporations, especially the Wapda and the Karachi Electricity Supply Company is another area of worry where no success has been achieved. Wapda’s 12 corporate companies have been formed but they are still to be privtised. These include 8 distribution companies, three generation companies and one transmission company.

One of the latest report of the World Bank says that poor and deteriorating governance has accentuated Pakistan’s turmoil. “Since 1990 four democratically elected governments had been dismissed, two of them on corruption charges. At the core of governance problems is the widespread abuse of the state’s democratic institutions. Those incharge of encouraging modernization and social change were often the one blocking it with a consequent disregard for the separation of powers and respect for the rule of law”, the report said.

It also said that the continued tensions in the region starve Pakistan of crucial resources for development and reduce opportunities for close regional integration. The civil war the in Afghanistan has also constrained Pakistan’s development prospects. Millions of Afghan refugees have become a heavy burden on the local infrastructure (3 out of 5 outpatients in NWFP are Afghans, for example). They are also an irritant to Pakistani society, which believes they are involved in drug and arms trafficking and creating law and order problems”, the World Bank report said.