IMF’s new loan

WHAT was on the cards even before the September 11 tragedy has finally happened. The IMF Board has approved Pakistan’s request for a medium-term loan amounting to 1.3 billion dollars from its Poverty Reduction and Growth Facility(PRGF). Pakistan will receive the allocated amount in 12 equal instalments of a little over 100 million dollars every three months. While this may not represent a huge amount in itself, certain positive repercussion may flow from it. A country engaged in implementing an IMF programme is normally regarded as stable and safe by foreign investors, and also qualifies for debt rescheduling. There is also a likelihood that the members of the Paris Club, scheduled to meet on Dec 11, may consider allowing Pakistan debt reprofiling rather than debt rescheduling. This could mean that the loan repayment period is extended to, say, 40 years and the interest rates cut down drastically. If the official donors agree to debt reprofiling, the debt burden of 12.5 billion dollars would be reduced to no more than a couple of billion dollars, closing the financing gap significantly for the current year and helping Pakistan escape the debt trap.

As the name of the facility suggests, funds from the PRGF are disbursed to help the recipient country reduce the level and extent of poverty and, at the same time, accelerate growth. On the face of it, this seems like a contradiction in terms. According to conventional economic wisdom, social sector spending is reflected in overall growth only after a fairly long time-lag. On the other hand, attempts to accelerate economic growth have a negative impact on social spending. Growth and social spending are adversely affected when attempts are made to simultaneously bring about economic stabilization by imposing strict controls on budgetary deficits. The three-year PRGF programme contains all these three elements, which the IMF claims would reinforce each other. The focus of the ten-month 568 million dollar Standby Arrangement (SBA), which ended on September 30, 2001, was on economic stabilization. However, while the IMF and Pakistan would like to term this programme a success, it has actually only succeeded in deepening the recession in the country, discouraging investment, causing job losses and failing either to improve revenue collection or reducing the budgetary deficit to the desired level.

Both the government and the IMF have attributed this visible failure of the SBA to stabilize the economy to the drought conditions prevailing in the country and to the post-Sept 11 developments; the programme itself, they believe, has not failed. How the economy would fare when all the three elements, which appear mutually contradictory, come into full play is something only the future will tell. Meanwhile, under the terms of the PRGF, Pakistan was eligible to borrow a maximum of 140 per cent of its IMF quota, amounting to 1.8 billion dollars or, in exceptional circumstances, a maximum of 185 per cent of the quota or 2.4 billion dollars. The actual approval is for an amount equivalent to 100 per cent of our Special Drawing Rights (SDR) quota. This means that the September 11 tragedy has actually made a difference of only 600 million dollars for Pakistan as far as the PRGF is concerned.

Crime in Lahore

VIOLENT crime for high stakes appears to have become the order of the day in Lahore. In the latest incident, a money changer lost not only upwards of Rs 7 million but also his life in one of the most congested localities. Normally, Yakki Gate, where the crime was committed, is not known for crime, especially of the magnitude witnessed. The family of the victim, a young man in his early thirties, is all in the money changing business. The facts of the case are intriguing. The young man used to keep his money at the residence of one of his employees who lives in Yakki Gate. When he went there to fetch the money together with his chauffeur, he already had Rs 6 million on him. He got another Rs 2.6 million from his employee, but just when he was nearing his car, he was shot at and died later at the Mayo Hospital. The employee escaped unhurt, while the chauffeur got away with a few superficial injuries. The three assailants literally walked out of harm’s way. They had the cool. Police consider the victim’s Yakki Gate employee and his chauffeur prime suspects. Police suspicions, however, are themselves suspect. Too often in the past have the Punjab police jumped to hasty conclusions. The money was meant to be taken to Kherian, where a police party has already been despatched to carry out investigations at that end.

Big crime in Punjab seldom leads to conviction. The province has more crime and little or no punishment. Anyhow, it was the fourth major crime in the Punjab capital in which three people have lost their lives. Meanwhile, Lahore seems to be catching up with Karachi so far as car-snatching is concerned. On Thursday, 25 vehicles were reported stolen while the police continue to sit on their haunches. Three special committees are said to have been constituted, but investigative methods are so archaic that they give us little room for optimism. This question as to why the money-changer had entrusted so much money to one of his employees defies explanation. Such vast sums of money should be transacted through the normal banking channels, provided, of course, that the money involved is white, but white money or black, the police have a job on their hands.

Stamping out extortion

THE menace of extortion seems to have gathered strength in Karachi in Ramazan. In recent weeks, several cases have surfaced of young men — claiming to represent political parties — harassing local shopkeepers or pedestrians for money. The murder of a fruit exporter the other day also seems to be linked to extortionists who had gone to his office a day earlier and asked for a ‘donation’. The trader had quite rightly told these thugs to leave. But then, very tragically, he paid for it the next day with his life. What is perhaps even more regrettable is that some unscrupulous elements in the police seem to be part of this lucrative racket. The police department says its presence in the city has been significantly increased to deal with any eventuality arising out of the generally festive atmosphere, with people going out in droves, shopping and eating out.

However, the effect of the extra deployment is proving to be quite the opposite. There have been many complaints of constables deployed at busy traffic intersections or shopping areas being more interested in squeezing money from passing motorcyclists than in doing their actual job of providing security. If the government wants citizens to feel secure then it must order the police to take to task all such elements who indulge in this extortion. At the same time, political parties or groups who feel that this time of year is ripe for getting ‘donations’ should desist from forcing people to pay up. If that happens, as it seems to be in some cases, then the government should act with all the resources at its command.