WASHINGTON, Oct 19: Pakistan had approached the International Monetary Fund (IMF) for the endorsement of its programme for boosting the country’s ailing economy and was also seeking financial assistance from the world body, US and diplomatic sources told Dawn on Sunday.
“The outlines of the programme will emerge during this week,” said a source familiar with talks. “The IMF is expected to convey its opinion to Pakistan by Tuesday or Wednesday.”
The sources also confirmed reports published in the US media on Sunday that President Asif Ali Zardari had returned from China without a commitment for cash needed to shore up the economy.Faced with the possibility of defaulting on its current account payments, Pakistan had no option but to seek money from the IMF, the reports said.
An IMF-backed plan would require Islamabad to cut spending and raise taxes, among other measures, which could hurt the poor.
But Pakistani officials engaged in negotiations with the IMF and other donors said they had had “very positive” talks with them. “We will get out of the wood,” said one such official.
“We may, or may not, take money from the IMF but we are seeking their endorsement because it will help us get assistance from others.”
Another official said that Pakistan was engaged in “very delicate negotiations on all sides, with IMF officials, with other governments and we remain optimistic”.
The official said that Pakistan hoped to get support from the ‘Friends of Pakistan’ group, formed in New York last month to help the country overcome its economic problems. The group holds its first working session in Abu Dhabi next month.
“We also hope to get standby facility from the IMF,” said the official. He said that Pakistan’s Financial Adviser Shaukat Tareen had “very positive” discussions with IMF and World Bank officials in Washington last week.
Other experts, including Shahid Javed Burki, a former finance minister and vice-president of the World Bank, have advised Pakistan not to enter into an IMF programme.
“The IMF conditions will constrain Pakistan,” Mr Burki said. “At this stage, Pakistan needs to avoid constraints. The government should have a free hand to spend on power development, creating employment, and on other similar measures.”
An official involved in talks with the IMF said that while the government respected Mr Burki’s point of view, it wanted to keep its options open. “The IMF is not our first preference,” the official said.
“It is true that the Fund places tough conditions but other donors will have conditions too.”
The official noted that China, considered Pakistan’s strongest ally, had refused to provide financial assistance without conditions. “People should realise that when even China is unwilling, others are not going to come forward,” he said. “Economic realities determine relations with other governments and international financial institutions, not romance.”
The official noted that in 1999 the Musharraf government faced a similar situation and was forced to borrow some money from the IMF.
“IMF’s assistance is like credit approval,” the official said. “If you have this approval, others will assist you as well.”
Pakistan was expected to ask the IMF to give it much-needed cash after China refused to give it a firm commitment on the issue, said the New York Times.
With the United States and other nations preoccupied with a global financial crisis and Saudi Arabia, another traditional ally, refusing to offer concessions on oil, China was seen as the last port of call before the IMF, the newspaper said.
Pakistani officials were quoted as telling the newspaper they had received promises from the Chinese to help build two nuclear power plants, and pledges for business investment in the coming year. But Islamabad had hoped Beijing would deposit $1.5 billion to $3 billion in its central bank, according to senior officials working for the IMF and western donor countries.
Asked about the likelihood of Pakistan winning the direct cash infusion it was seeking, a senior Chinese diplomat was reported by western officials as saying, “We have done our due diligence, and it isn’t happening.”
“What we needed is $3 to $4 billion,” said Sakib Sherani, a member of the government’s economic advisory panel and chief economist at the ABN Amro Bank in Pakistan. That amount was necessary to build confidence in Pakistani markets, he said.