IT is being speculated that the caretaker federal setup will negotiate a fresh arrangement with the IMF which the present PPP-led government would definitely avoid in an election year.

Given the difficult balance of payments and widening fiscal deficit, it is also assumed that the newly elected government — probably another coalition arrangement — would own the arrangement, even if it chooses to criticise the agreement ‘foisted’ on it.

Whatever its policy position, no future government can find it convenient to repudiate an agreement with the IMF, a traditional long-time lender who has come to Islamabad ’s rescue whenever the economy has suffered an external sector crisis, despite an unstable transactional relationship between the two sides.

However, will Islamabad abide by the agreement? The issue is rooted in different approaches of the two sides. Pakistan’s primary interest lies in securing fiscal and balance of payments support for which it readily undertakes to bring about reforms that would qualify it for the IMF funds. The Fund expects reforms to be implemented.

However historical record shows that country’s economic managers are unable to deliver because of domestic resistance, compulsions or unwillingness. Th reforms have been slow to come through an evolutionary ‘development process’ while not keeping pace with the fast changing global and domestic economic environment.

Investigating as to why most of the IMF programmes went off the track during 1971-88, the Internal Evaluation Office (IEO) of the Fund attributed it to design flaws of the IMF programme laden with ‘ overoptimistic projections with regard to growth, non-availability of contingency plans and setting of unrealistic targets,.’ while overlooking the adverse side effects.

The IEO team accepted that the tax revenue targets were consistently unrealistic. The IMF was eying on ‘quick fixes’ and ‘expected long- term reforms to be achieved in the short-term.’

And finally, ‘the IMF- supported programme could not focus on the right issues mainly because of designed flaws.’

Salient features of the IEO study have been analysed by Mr Ashraf Janjua in the History of the State Bank of Pakistan 1988-2003.

And some of the reforms have been counterproductive like reducing customs tariffs without effectively tapping alternative sources to make up for the loss of revenue.

The IMF expects agreed reforms agenda to be carried forward. The Fund disburses committed credit in installments which are linked to progress on the reforms.

While the government of the day may be completely sold to the idea, say of VAT, it cannot impose the tax on an unwilling and powerful economic agents. In these days, it is the market and not the government that tends to dominates public policy.

So the IMF reforms have to be owned by all major stakeholders and not the incumbent government alone.

If the IMF reforms are divisive, they have less chances of being implemented. Any policy change that ignores the nation and a corporate culture and relies on administrative machinery alone cannot have unqualified success. The most effective weapon is national consensus or national ownership of a programme or policy.

The IMF reforms have failed to inspire popular enthusiasm and generally faced severe domestic criticism.

Even some of those who have fully subscribed to the IMF programme have had reservations over its timing, sequence or rigidity — ‘one size fits all’ policy .

The IMF is too slow to adopt to new ideas and a victim of dogmatic thinking. It failed to learn anything from Malaysian experience that temporary capital controls can help resolve international or regional financial crisis much quicker. It was the devastating global financial crisis of 2008-09 and tiny Iceland that made the Fund recognise the Malaysian wisdom.

Despite a long erratic historical relationship, the IMF comes to Pakistan’s rescue for three major reasons. First, it is influenced by its major shareholder, the US, when Islamabad moves into its global strategic orbit.

Second, the Fund cannot afford to see Islamabad default on its debt payments as it impacts adversely on the international financial system, which Islamabad has done in the past implicitly by delaying payments of installments through administrative means.

However, policymakers in Pakistan have been wise not to default on payments due to the IMF to keep the international lender comfortable at least on this count.

This is how Pakistan manages to get IMF on board whenever it needs some sort of temporary bailout, unless of course, Uncle Sam is deeply annoyed with Islamabad for his own strategic reasons.

Whenever America is on board, Islamabad has also been given waivers liberally for its failure to carry the agreed agenda with the IMF. In these ‘good times,’ if some insiders are to be believed even fudging of national accounts are tolerated by the international lenders including the IMF.

It is time that both the Fund and Islamabad re-visit their policies and programmes to forge a new, stable and long lasting mutual relationship by shaking off divisive policies.

This can only happen if Pakistan is allowed to chose its own path and reforms are developed by domestic experts, of course keeping international experiences in view to attain agreed goals. And inclusive growth should receive top priority to dispel the deep-seated grievance that IMF reforms lead to ‘private gains and social pains.’