In all her recent public appearances, IMF Managing Director Christine Lagarde has reiterated the same message: Pakistan is out of crisis and a “moment of opportunity” presents itself. But policymakers must seize this moment and carry forward with the reforms needed to ensure that the hard-fought macroeconomic stability of today translates into prosperity tomorrow. In a wide-ranging interview with Dawn, Lagarde spelled out her vision for a post-programme Pakistan in more detail, from continuing with the reforms, to how the Fund is viewing the growing cooperation between China and Pakistan under the corridor projects.

Christine Lagarde
Christine Lagarde

She calls for doubling public outlays on health and education and more efforts to make growth inclusive, particularly in expanding opportunities for women. The power sector is cited as an example of successful reform under the programme, but also identified as an area needing more “in depth” and “strong” reforms in the future. CPEC projects, she says, need to be “efficient” and “transparent” for their benefits to flow.

Finance Minister Ishaq Dar claimed this is the first IMF programme that Pakistan has completed and the MD, sitting next to him during the press conference where this claim was repeated, agreed. Prior to the interview, it was pointed out to her that this claim is untrue. A few other details she mentions are of doubtful merit, such as her claim that the present IMF programme was “endorsed by an electoral vote back in 2014”.

The full interview will air on DawnNews tonight, and is available on the website. Below are some excerpts.

Q. This is not Pakistan’s first IMF programme. The country has spent more time in IMF programmes than out of them since 1988. What makes this programme different?

A. I think what is different about this programme is that it was owned by the Pakistani authorities and it was endorsed by an electoral vote back in 2014. So it was not so much a set of IMF prescriptions, rather a set of proposals that the authorities wanted to implement to strengthen the economy. Don’t forget that at the time, Pakistan’s economy was in crisis and had to be cured. As you rightly say that some programmes were completed, there were many more programmes which were never completed.

Q. Are the improvements that you talk about [in various public appearances] on a sustainable footing at this point in time?

A. About three years ago when the programme started, the economy was in a crisis and the first thing you do is establish macroeconomic stability. Then you can start the long-standing reforms that will structure the economy for the long term. So what this programme has brought about is a level of stability and that trend of keeping public finance under good control.

Q. But macroeconomic stabilisation was only one element of the programme. The other element was structural reform. How much progress has been made on this side, beyond the macroeconomic indicators?

A. There has been some progress. If you look at the energy sector, for instance, and the way in which the arrears that were really crippling the system have been reduced, the way in which services are being provided at a regular rate with fewer outages, this is significant improvement. But it is not over, it has to be continued, and the energy sector is one where there have to be in depth, strong reforms.

Q. How much has this programme done to ensure that two or three years down the road, Pakistan will not be back at the doorstep of the IMF?

A. What I can tell you for sure is that the Pakistani authorities have not asked for yet another programme and they feel confident that by continuing to improve the economy and continuing with the reforms that they have begun will be enough and sufficient to keep the economy going in good stead.

Q. How are you seeing the impact of the China corridor projects, and the associated outflows connected with them once they begin operations?

A. Any infrastructure development is going to be beneficial for the short and the long term. One caveat: it needs to be structured in an efficient way, and a transparent way as well. How it’s funded, whether a combination of grants and loans, what those loans are about, what the guaranteed revenue is in the medium term, all of that has to be on the table.

Q. Is that on the table? In the IMF’s meetings with Pakistan, do you find you have a clear picture of the outflows and inflows and the financing associated with these projects?

A. When we operate under a programme, yes. But when we are not under programme, which is going to be the case from now on, we do the bilateral review of the economy and we access anything that contributes to the macroeconomic framework, it doesn’t mean to say we are reviewing details, the contracts and the undertakings between the Chinese authorities and the Pakistani authorities. But certainly there is a project integrity that we look at to make sure that everything that is public spending is actually delivered in the numbers that we are given.

Published in Dawn, October 26th, 2016

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