The IMF review mission which concluded talks on the second review in Islamabad last week has commended the authorities for their ‘continued prudent, macroeconomic management despite a volatile international environment and for their sustained implementation of the wide-ranging structural reform agenda.”

This is a standard certificate of health which the IMF review missions issue to programme countries having influential friends on the Fund Board.

The circumstances under which Pakistan and the Fund signed the three year $1.3 billion Poverty Reduction and Growth Facility (PRGF) in December 2001 were themselves highly special. Pakistan had become the darling of the US and the other influential members of the IMF Board following 9.11. So, the amount of the PRGF loan was pushed up from $700-800 million to $1.3 billion without much ado. And there was no question of any break in the programme, no matter how many slippages were committed as long as Pakistan is seen to be on the side of those fighting the so-called war against international terrorism.

The Fund mission has described as positive signals the build-up of $5.3 billion reserves, the inflow of $1.6 billion in remittances, the $2.1 billion surplus in current account deficit, 3 per cent rate of inflation and the monetary policy of the State Bank of Pakistan. The negative signals according to the Fund mission were tax collection of Rs305 billion ( 9 months provisional), slow progress towards reforms of the CBR and the concessions announced by the President in the run-up of his referendum campaign.

However, just before the departure of the Fund team the government started correcting the situation on the electricity and POL concessions announced by the President to win votes in his referendum. The highly subsidized support price for wheat is likely to be maintained, however, because the government needs the support of the rich landlords in the October elections and the Fund would not be averse to ignoring the slippage for obvious reasons. The increases in the defence budget necessitated by the war-like situation created by India have also been condoned by the Fund mission. In fact the Fund believes that the savings accruing in debt servicing due to appreciation of the rupee value against hard currencies could more than offset the increases in the defence budget.

That is perhaps the reason why the Fund has not allowed target of 5.7 per cent which had already been revised upward from the original target of 5.3 per cent. The government had perhaps requested for a new budgetary deficit target of 6.1 per cent. The blind insistence of the Fund that the government should adhere strictly to the given budgetary deficit target and the government’s readiness to accept this condition without going into its adverse implications for the economy as a whole seem to have landed the country into what appears to be a bottomless pit of recession.

The continued stagnation in the revenue collection is directly related to the depressed rate of growth of 3 per cent.

And even if it is attempted to be improved to 4 per cent next year the collection would remain abysmally low. The growth is not picking, not because of external reasons or because of the stray incidents of law and order, but because of stagnation in the rate of investment. This stagnation has continued over the last five years and has deepened further with the implementation of the 9-month Standby Arrangement that ended ‘successfully’ in September, 2001.

One had thought that with the launching of the PRGF programme which by its very name is meant to promote growth and reduce poverty, things would start perking up. But so far no improvement seems to have occurred. Exports and imports have continued to stagnate. The manufacturing sector as well as the agricultural sector seem totally unresponsive to all the Fund prescribed reforms that the government has so far implemented. The CBR itself is still working in the same old style. It is as corrupt and as inefficient today as it was 30 months ago. There seems to be no hope of the government achieving its privatization targets because the buyers ( investors) are not coming forward and those who seem interested in buying the family silver want to buy them at throw away prices.

The biggest sufferer of the slow growth of the economy is the poor man who is not getting any jobs and those who have jobs are finding it increasingly difficult to make both ends meet within the means of their current incomes despite the official claims of low rate of inflation. In fact if the rate of inflation was really as low as 4 per cent as per the government claims then this should have reflected in a downward revision in the bank interest rates. Though the interest rates have been revised downwards to 12 per cent in the last one year, yet only few lucky ones get their advances at this rate. Many still have to pay a lot of additional charges which pushes up the cost of the money to almost 15 per cent. On the other hand the banks despite those so-called reforms are still being run highly inefficiently as a result of which the charges that they extort from their depositors would not have been so high. With the cost of the high there is hardly any likelihood of investment picking up in the foreseeable future.

No reforms so far seem to have touched even the public corporations. They continue to be a serious drain not only on the budget but also on the pockets of the common man. The government in order to reduce its own budgetary burdens has allowed these corporations to push up the prices of their produce and tariffs of their utilities whenever their costs go up. This has only added to their inefficiency. So, all in all, with no investment and depressed growth, there seems hardly any hope of reduction in the all pervasive poverty in the country. In fact if things go the way they are going now, one cannot rule out the possibility of a visible expansion in poverty in Pakistan at the end of the PRGF programme in 2004.per cent next year the collection would remain abysmally low. The growth is not picking, not because of external reasons or because of the stray incidents of law and order, but because of stagnation in the rate of investment. This stagnation has continued over the last five years and has deepened further with the implementation of the 9-month Standby Arrangement that ended ‘successfully’ in September, 2001.

One had thought that with the launching of the PRGF programme which by its very name is meant to promote growth and reduce poverty, things would start perking up. But so far no improvement seems to have occurred. Exports and imports have continued to stagnate. The manufacturing sector as well as the agricultural sector seem totally unresponsive to all the Fund prescribed reforms that the government has so far implemented. The CBR itself is still working in the same old style. It is as corrupt and as inefficient today as it was 30 months ago. There seems to be no hope of the government achieving its privatization targets because the buyers ( investors) are not coming forward and those who seem interested in buying the family silver want to buy them at throw away prices.

The biggest sufferer of the slow growth of the economy is the poor man who is not getting any jobs and those who have jobs are finding it increasingly difficult to make both ends meet within the means of their current incomes despite the official claims of low rate of inflation. In fact if the rate of inflation was really as low as 4 per cent as per the government claims then this should have reflected in a downward revision in the bank interest rates. Though the interest rates have been revised downwards to 12 per cent in the last one year, yet only few lucky ones get their advances at this rate. Many still have to pay a lot of additional charges which pushes up the cost of the money to almost 15 per cent. On the other hand the banks despite those so-called reforms are still being run highly inefficiently as a result of which the charges that they extort from their depositors would not have been so high. With the cost of the high there is hardly any likelihood of investment picking up in the foreseeable future.

No reforms so far seem to have touched even the public corporations. They continue to be a serious drain not only on the budget but also on the pockets of the common man. The government in order to reduce its own budgetary burdens has allowed these corporations to push up the prices of their produce and tariffs of their utilities whenever their costs go up. This has only added to their inefficiency. So, all in all, with no investment and depressed growth, there seems hardly any hope of reduction in the all pervasive poverty in the country. In fact if things go the way they are going now, one cannot rule out the possibility of a visible expansion in poverty in Pakistan at the end of the PRGF programme in 2004.