Thinking through the IMF programme

It is to be appreciated that IMF officials, unlike the past, are now more open and forthcoming in discussing a programme with a member country and the risks associated with it for the information of various stakeholders. Addressing Senior Journalists’ Forum, IMF resident representative in Islamabad, Teresa Daben Sanchez, identified Financial Action Task Force (FATF), provincial spending behaviours and insufficient parliamentary strength of the government as key risks to the Fund’s dollar 6 billion 39-month bailout programme. She also revealed that the details of CPEC loans were discussed with the IMF and the debt sustainability analysis showed that these loans were manageable. In fact, the CPEC helped the country deal with the issue of load-shedding and this was something very positive about the CPEC projects. Speaking about key reforms, she said that implementation of financial management to instill fiscal discipline in the public sector, greater autonomy to the central bank, energy sector improvement, strengthening of anti-corruption agencies and compliance with FATF were the part of the programme while goals of the programme were debt sustainability, stronger tax collections, independent central bank, market-based exchange rate and moderate inflation trajectory as well as efficiency in the power sector. The risks to the programme were absence of majority of the ruling party in the parliament, fiscal slippages, large amounts of rollover need for short-term debt and placement of the country on the grey list as this could have implications for capital inflows to Pakistan that could jeopardise the financing assurances under the IMF programme and other sources.

We feel that the address of the Fund representative to the senior journalists about the key points of the EFF programme was brief but very much to the point. She preferred to avoid, and rightly so, explaining exercises and econometric models which must have been undertaken to finalise the programme conditionalities in quantitative terms on a quarterly basis. She, therefore, employed simple language to highlight the points which were necessary for journalists to understand and digest in order to pass on the basic information of the programme to the end-users. Obviously, if journalists were themselves not fully aware about the programme and did not comprehend the reasons for prescribing conditionalities, they cannot be expected to pass on the right kind of information to the general public in order to soften the opposition to the programme which usually brings hardships to the ordinary people in its initial phase. Most of the goals of the EFF programme, as well as the background in which the programme was negotiated were also aptly explained by Sanchez who surely possessed comprehensive information about the programme due to her official position. Hopefully, such interactions will be continued to inform journalists and the general public about the latest developments of the programme, particularly the likelihood of missing its targets and the possibility of a waiver if a target is not likely to be met.

The most important part of Sanchez’s address, in our view, was the enumeration of risks to the programme. She has rightly identified the absence of outright majority of ruling party in the Parliament and the country’s FATF challenge as risks to the programme. The present government would definitely feel itself in a tough situation if the opposition is not supportive which, unfortunately is the position at this point in time. It may, nonetheless, be mentioned that Sanchez has not included the likelihood of higher oil prices in the international market, adverse weather conditions and the flaring up of confrontation at borders in the list of risks. May be she thinks that these risks are too obvious to be included in a short speech. Anyhow, we can realise the utility of observations of a person who is well-versed about the programme and knows about its nitty-gritty in full. Hopefully, she would continue to find time to disseminate the progress on the programme and the obstacles, if any, in its faithful implementation.

Copyright Business Recorder, 2019

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