After the successful completion of the three-year structural adjustment programme it is hoped that the IMF will be gone for good from Pakistan.

The IMF-supported Pakistan's economic reform programme with a three-year arrangement under the Poverty Reduction and Growth Facility (PRGF).

This programme was approved by the IMF Executive Board in December 2001 and it will be completed in December 2004. Since its approval, seven programme reviews have been completed successfully and discussions for the eighth review held in April 2004.

In the light of considerable improvement in economic fundamentals during recent years, the finance minister indicated to the IMF that Pakistan would not request a successor arrangement to the current PRGF.

This will be a very important milestone for Pakistan following a long, troubled and much criticized history of financial assistance provided by the IMF to Pakistan. This will be the first programme completed on time and with such a high degree of success.

Now there are three pressing questions that need to be explored. First, was it really the IMF assistance and the design of the programme that helped Pakistan reach the present state of fiscal and monetary stability? Second, was it our economic managers' competence, hard work, and commitment that took us through to this day? Or, was it rapidly changing external environment and exogenous factors that compelled us to put our house in order?

By the late 1990s, Pakistan was facing a very difficult economic situation and was on the verge of defaulting on international commitments. The major reasons for this precarious economic situation were political instability, imposition of economic sanctions following nuclear device test in May 1998, and intermittent attempts in the past to carry through adjustment and reform programmes were too often followed by policy reversals and thus failed to generate positive results.

Economic growth averaged a historically low three per cent in the late 1990s, barely exceeding the population growth rate. For years, the fiscal deficit remained well above six per cent of GDP.

This caused a continuous increase in public sector indebtedness and required a growing share of government resources to be used for interest payments. The government was forced to acquire new loans to repay old loans and the country sank deep into a debt crisis.

Against this background, the main objectives of the current PRGF programme, like most of the previous IMF programmes, were (a) to extract the country from a debt trap; (b) to accelerate economic growth; and thus (c) to contribute to an improvement in social indicators and arrest rising poverty in the country.

Comparison of the pre- and post-Programme period, macroeconomic indicators clearly show that the economy has come a long way during the Programme period. Pakistan has made strong economic progress over the past few years, despite a weak international economic environment and regional security issues.

Reflecting the reduction of fiscal imbalances, complemented by structural reforms, inflation has been brought under control and the foreign reserve position has improved greatly.

External and fiscal vulnerabilities have been reduced, the financial system has been strengthened, and the economy has become more resilient to shocks. Finally, and most importantly, economic growth has begun to recover. Was it really the PRGF that made all this happen?

The initiation of this particular programme coincided well with the drastically changing external political environment, especially in the region where Pakistan is located.

As mentioned earlier, the Programme was initiated in December 2001, just two months after 9/11. Pakistan instantly became the front-line country in the US-led global war against terrorism and consequently became a darling state to the US. Economic sanctions were lifted and all sorts of praises, both in kind and in cash started pouring in.

Other leading developed countries of the world also followed the US and started sending grants, aid, and offers of rescheduling their debt to Pakistan. Pakistan while bowing to the stick fully capitalized on the carrot offered to it.

In addition to that, there are number of external factors linked to events of 9/11, outside the IMF programme, that were instrumental in bringing about economic stability in the country.

For instance, due to changed circumstances the "hundi system" vanished and more formal channels took over as a means of sending in foreign remittances by the expats residing in foreign countries.

These expats also started transferring their assets to the home country. This to a greater extent took care not only of the foreign exchange reserves, which were dangerously low in 1999, but also helped in bringing down the spiralling exchange rate, and arrested the widening gap between the official and the open market exchange rates.

Although the war on terrorism has raised risks for both the common man and the ruling elite in terms of increased terrorist attacks in the country, but it has also been a blessing in disguise for Pakistan - a positive externality in economic terms.

For the first time in the history of the country the government has shown its resolve and courage to take sectarian and religious extremism head-on and with full force.

This is also a kind of investment to improve the image of Pakistan and if government managed to control this menace than it can go a long way in helping Pakistan attract more foreign investment, tourists, and cricket teams from abroad.

Coming back to the basic question that we have raised in the beginning that what has really caused economic stability in the country, the situation in which Pakistan find itself for last 3-4 years is not new for Pakistan.

Pakistan has been darling to the US and the West in the past when it was front-line state in war against Communism and Russian occupation in Afghanistan. All sorts of praises both in kind and in cash were pouring in than also.

May be the situation was less lethal then but the economic and military assistance by the US and the West was more or less equally generous. The country's leadership at that time was also with the military and not in the hands of the "corrupt and incompetent" politicians.

One can easily draw lot of similarities between the situations in war against terrorism now and the war against communism in the late 1970s-early 1980s. However, the resultant economic performances are markedly different. This means that there must be something more than just the external factors that have helped in attaining present state of economic stability.

Should then the credit be given to the IMF programme? The programme that has faced at times most severe criticism, especially by the intellgencia in the country. But this was not the first IMF programme.

The IMF's first structural adjustment programme was initiated in 1988-89 during the first round of Benazir government. Since then there were numbers of programmes but the outcome was the same - further sinking and sickening of the economy - whether it was under PPP government or the PML government (of Nawaz Sharif), which was much more consolidated and unified compared to CKD condition of the present times.

Then it must be the economic managers of the present government that have made the difference. In fact it must be Shaukat Aziz that has done the turnaround because the rest of the economic team (especially the PhD ones) is more or less the same.

One does not see many new faces except the finance minister himself. Is the present finance minister more competent, committed, and erudite than Sartaj Aziz or Dr. Hafiz Pasha - the two former captains of the Pakistan's economic team? It is very difficult to pass any judgment on that because the two former captains were also equally, if not more, thorough and committed professionals as the present minister is.

Had Shaukat Aziz fallen in the same hands as did other Aziz or Dr. Pasha, the result would have been the same - further rotting of the economy and more bashing of the World Bank and the IMF, the two readily available escape goats to put all the blame on.

The point I am trying to make, without taking away any credit of the hard work that the economic managers of the country have put in, or of the IMF Programme, is that unless the top leadership - the secret of the success - is interested and committed to bring change for the better, the rest of the factors are necessary but not sufficient to achieve desired results.

Now the last but not the least question is that can our economic managers, with the full blessing of the 'secret of the success', manage to continue and sustain the hard earned economic stability without the IMF 'dictates'? Because the economic stability is still quite fragile as the debt overhang is still substantial.

Revenue mobilization is less than satisfactory, and most importantly, effectiveness of public expenditure is still badly compromised by poor governance and bad management. Thoughtless spending spree by the government can rapidly evaporate the newly found fiscal affluence. Therefore, the challenges ahead are uphill and daunting.

Although Pakistan has achieved almost all the targets set out in the current PRGF programme at the beginning of the Programme period in 2000-01. Unfortunately, the available data, however, show little evidence of a reduction in poverty.

There is no question that a large part of Pakistan's population still remains below or close to the poverty line, and that many do not have proper access to drinking water, health and education services.

Thus, while Pakistan has come a long way, there are considerable challenges ahead to translate stronger macroeconomic indicators into lower poverty. For the fiscal year 2004-05, a growth rate of six per cent, as envisaged in the medium-term macroeconomic frame work, could very well be realized, building on the current momentum, provided that external demand and local weather conditions remain favourable.

But maintaining growth rates of six per cent and higher over the medium term will require a substantial increase in private and public investment, accompanied by significant improvements in productivity. It is well accepted that economic growth is necessary, but not a sufficient condition to reduce poverty.

A lack of access to basic public services, markets, and institutions impedes the ability of the poor to improve their living standards. Thus, apart from growth, the second main condition to reduce poverty, as mentioned in PRSP, is greater social inclusion, including through human development and devolution. Attempts to address these challenges have to be more specific and targeted with a well thought out implementation plan.