ISLAMABAD, Nov 13: Pakistan has been advised by the International Monetary Fund to continue seeking assistance from the Fund to further improve the country’s economy.
Informed sources told Dawn on Thursday that the IMF was willing to offer “concessional lending” to Pakistan if the government made such a request after the expiry of the $1.4 billion Poverty Reduction and Growth Facility in November 2004.
Senior IMF officials believe that the country deserves enhanced funding because of the fact that its economy has shown signs of improvement during the last four years.
However, the sources said, the IMF officials were told that a decision had been taken “at the highest level” not to seek new IMF funding as it always carried harsh conditionalities and strings.
At a meeting on September 8, IMF’s Executive Director Abbas Mirakhor had reportedly asked Finance Minister Shaukat Aziz to enter into a fresh concessional agreement with the IMF after the expiry of the PRGF.
Mr Mirakhor had said that Pakistan’s economy still needed IMF support and that the government should reconsider its decision.
During IMF’s Oct 21-22 annual meetings in Dubai, the finance minister was again advised by the Fund officials to continue seeking assistance for a couple of years more.
IMF authorities were surprised why Pakistan had decided to mobilize $500 million through bonds flotation at relatively costlier terms when it could borrow at highly concessional rates from the IMF.
The matter will be taken up again when the IMF mission visits Pakistan in December for the eighth review of the country’s economy. The completion of the sixth and seventh reviews had helped the government to secure two tranches simultaneously, amounting to $245.5 million last month.
The sources said the IMF was also asking the World Bank and the Asian Development Bank to persuade Islamabad to review its decision.
Pakistan has, however, said that it will continue seeking the World Bank/ADB assistance as it does not carry harsh conditionalities.
Rising poverty and declining job opportunities — a direct result of IMF’s conditionalities restricting public spending to achieve macroeconomic stability — have forced the government to stop borrowing from the IMF and spend more money on the public sector to reduce poverty and create jobs, the sources added.