THE short statement released by the IMF board following the eighth review of the ongoing Fund programme is better understood for all the things it does not say.
Take as an example the board’s view of the fiscal situation, which has been the subject of much controversy lately within the country.
The board does not say that the fiscal situation has improved, preferring to restrict itself to an anodyne comment that “[t]he authorities’ commitment to strengthening Pakistan’s fiscal position is welcome”. It goes on to add that further steps “remain key” to delivering on this commitment, laying out the usual recipe of “broadening the tax base and strengthening tax administration”.
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The inability of the board to note anything more than a “commitment” to strengthening the fiscal framework is what should be noted.
Likewise with the progress on many other fronts. It notes an improvement in the foreign exchange reserves, but says “additional efforts are needed”.
Similarly, on central bank autonomy, the board calls for the “early adoption of pending legislation”, a matter that has been dragging for many years now. Also with the required amendments to the anti-money laundering legislation, which the government had committed would be passed by the end of September, the board notes that it “remains an important policy priority for the authorities”.
The statement refuses to view the controversy surrounding the fiscal numbers declared by the government at the end of June, which is to be expected. But the more detailed review documents that should be released soon would be deficient if they did not tell us more about how the Fund is looking at this affair.
The board has placed its priorities for Pakistan on record; these include power-sector reforms and privatisation. The fact that the board said very little about the external sector and the quality of the improvement in the reserves as well as rising external debt is an important gap.
At its core, the Fund’s main priority is to ensure Pakistan’s creditworthiness before external creditors, but this is an important area of concern domestically, especially given the continuing Eurobond issues this fiscal year, and more should have been said about it beyond “additional efforts are needed to strengthen external buffers”.
Does the growing resort to borrowing count as such “additional efforts”, or is it in fact weakening the external framework over the medium term? Sadly, we are left to guess for ourselves.
Published in Dawn October 1st, 2015
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