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Plan A & B evaporate: Pakistan recourses to begging bowl

By Tanveer Ahmed

KARACHI: The country has finally swallowed the bitter pill of recourse to IMF, for stabilising the ailing economy, by almost shelving the oft-repeated Plan A & B.

Finance Adviser, Shaukat Tarin on Saturday announced that IMF would extend $7.6 billion to Pakistan under 23-months loan arrangement at 3.5 to 4.5 percent interest.

The loan is issued under IMF's standby facility, which is designed to help countries address short-term balance of payments problems. Stand-Bys have provided the greatest amount of IMF resources. The length of a SBA is typically 12 to 24 months, and repayment is normally expected within 2 to 4 years.

The official announcement has finally put all the speculation, circulating in the cross-section of the country about the possible financial assistance from the IMF, to rest.

"It proves that government miserably failed to secure financial assistance from avenues other than IMF," suggests the opinions expressed by industrialists, economists and analysts.

An economy considered resilient just one year back collapsed like ninepins and now is compelled to use the IMF option, which is very unpopular amongst the people.

The economists and industry people are also unwilling to buy the argument that the financial assistance of IMF has been secured on our own terms and would not bring with it more miseries for the people at general and industry at particular.

"This can be accepted by only miss-informed people but not by those who have good knowledge of the history of IMF financial programmes for Pakistan and for the other countries of the world," they said. However, at one point most of them agreed that failure to receive any assistance left the economic managers with no other option from international financial institutions and Friends of Pakistan has pushed the government to take this unpopular decision. IMF, which is considered a lender of last resort-proved the same in case of Pakistan, as other "friendly" countries and organisations are willing to assist only by routing it through IMF, economists say. "We still believe that friendly countries are ready to help Pakistan at this critical time, but they are suspicious of the way we have behaved in the past as after every five to ten years we are knocking at their doors to help us financially, economist Dr Asad Saeed noted.

"This can be short-term solution to shore-up the depleting stocks. The long-term solution lies with development of our real sectors and to curtail the unprecedented growth of imports, which are eating up major chunk of precious forex reserves," he strongly contends.

The trade deficit jumped to $20 billion in the last financial year from just $4 billion only four years ago. Although the high international crude and commodities prices have been blamed for this increase in deficit, Saeed also attributed this to unchecked import of luxurious items like food items, garments, cosmetics by the privileged and elite class of the country.

KCCI President, Anjum Nisar also viewed the IMF as the last option in the current circumstances following the months long effort to win some financing from other avenues.

Analyst, Mohammad Sohail at JS Research said that IMF financial assistance would give some breathing space to government, at least in on one front i.e. forex reserves for the time being.

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