November 19, 2002	Tuesday	Ramazan 13, 1423

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WASHINGTON, Nov 18: The military government has assured international financial institutions that the next political government will continue the economic reforms it had initiated and Pakistan will fulfil the obligations made by the outgoing administration.

The assurance, given recently to the International Monetary Fund (IMF) and the World Bank, emphasizes that ‘the reform package’ introduced by the Musharraf government ‘commands broad consensus across the political spectrum.’

The IMF authorities privately worry that an elected government will be more susceptible to such pressure and despite Islamabad’s assurance, it may find it difficult to carry forward the reforms introduced by the military regime.

Besides, the government points out, ‘the economic gains’ of its reforms, which are ‘now beginning to be visible,’ will ensure the continuation of its policies.

Recent constitutional changes, the government says, also ‘emphasize the need to maintain sustainable macroeconomic policies’ and therefore, ‘the momentum of reforms will continue.’

“We are confident that the thrust of economic policies will be implemented as envisaged and that the next government will, by early 2003, finalize a full-fledged poverty reduction strategy, providing the basis for continued support through the poverty reduction and growth facility arrangement,” the outgoing administration says.

In a recent report, the IMF had commented on the Oct 10 elections, noting that ‘a large number of political parties’ had participated in these elections.

It also mentioned the constitutional changes made in August this year including the one that ‘extends Gen Pervez Musharraf’s presidency for five years and institutes a national security council as a constitutional body constituted to be consulted on strategic issues.

“The NSC will be chaired by the president and will include a majority of civilians, including the leader of the parliamentary opposition, as well as representatives from the armed forces,” the IMF observes.

“The government considered the amendments as needed to protect the reforms of the last three years,” it added.

The IMF also points out that Pakistan’s economic outlook remains clouded by regional and domestic security concerns. It notices that tensions with India have diminished somewhat since late June, but large military forces are still deployed along the border and skirmishes remain frequent across the Line of Control.

The IMF also expresses concern about isolated domestic terrorist acts, specially in Karachi, which it describes as Pakistan’s largest city and commercial centre, and in the area around Islamabad.

Despite the security situation and the elections, the government has broadly held the course on reforms and recent macroeconomic developments have been encouraging, the report says.

Continued regional tension and the associated risks, the IMF says, may partly explain the depressed levels of private investment, but have had otherwise little visible impact on the economy up to now.

In the run-up to the elections and confronted with surging international oil prices, the report says, the government delayed or weakened the adjustment of energy prices.

In September 2002, the authorities decided to postpone the increase in consumer gas prices under the medium-term gas-pricing framework agreed to with the World Bank.

Similarly, the structural tariff increase granted to KESC was weaker than expected, the report says. The KESC had demanded a 16 per cent increase but it was granted only a 6.5 per cent increase.

Some petroleum surcharges were also lowered in mid-September and early October to cushion the impact of surging world oil prices on consumers before the elections.

Only five days after the Oct 10 elections, the authorities increased surcharges across all petroleum productions and the prices were further increased on Oct 31.