Doomsday scenario: IMF paints a gloomy picture of Pakistan’s economy

[Major.]

Doomsday scenario: IMF paints a gloomy picture of Pakistan

Doomsday scenario: IMF paints a gloomy picture of Pakistan’s economy
By Shahbaz RanaPublished: January 18, 2013

“According to our one-month assessment, Pakistan’s currency is overvalued by 5-10%," says Frank.
ISLAMABAD:
The International Monetary Fund (IMF) may sign a loan programme with the caretaker government if all major political parties agree on a broader set of action plans. However, before that is possible, Pakistan will have to take some tough prior actions, says the Fund’s representative for the region.
In a luncheon meeting with a group of journalists here on Friday, Jeffrey Franks, adviser to the IMF for the Middle East and Central Asia, spoke at length on the grave economic situation the country is faced with. He also shed light on the Fund’s ongoing dialogue with the government, aimed at building consensus on a set of conditions needed to be fulfilled before and during the course of a fresh bailout programme. Franks was accompanied by the new IMF Country Representative Mansoor Dailami.
“The current polices will have to be readjusted in order [for Pakistan to become eligible] for an IMF programme. The IMF has discussed with the government what kind of policies would be necessary,” said Franks.

The IMF’s prescription to Pakistan includes a healthy measure of – not surprisingly – increasing taxes, cutting expenditures, withdrawing electricity subsidies and increasing interest rates to check inflation, which is expected to rebound soon and devalue the currency further.
“We have agreed with the government that the deficit eventually needs to come down to 3-3.5% of the GDP in three years, from the current level of over 7%,” revealed Frank. “According to our one-month assessment, Pakistan’s currency is overvalued by 5-10%. Modest depreciation might yield positive results for the economy,” he added. “The monetary policy also needs to be calibrated to bring down inflation to between 5-7%.”
He underscored the need for having “broadest and deepest possible political support for any new programme”. Franks also sought support at the highest levels, besides taking provinces on board, before the government enters into a formal arrangement with the Fund. He said that if political parties agree on a broader reforms agenda, the IMF can be flexible on how Pakistan goes about achieving it.

“The decision whether or not we will enter into a programme with the interim government will be made by the IMF management: however, if there is very strong and broad political support, going beyond the interim government, it might be possible,” Franks said, while responding to a question asking about the timing of the programme.
The IMF official observed that Pakistan’s problems require long-term solutions, and that any new programme will not last less than three years.
Franks disclosed that, according to the IMF assessment, this year’s budget deficit will remain around 7-7.5% of the GDP. In absolute terms, the IMF projects a Rs1.624 trillion deficit – a whopping Rs516 billion or 2.3% higher than government estimates. Besides the significant shortfall in revenues, Pakistan also may not be able to complete the auction of the 3G telecom spectrum, causing another shortfall of around Rs75 billion.
To add icing to that unsavoury cake, the economy will grow just 3.5% this year according to the IMF’s estimates, as against official projections of 4.3%.
“The number one bottleneck to growth is the energy sector. The number two bottleneck is the energy sector, and the number three
bottleneck is also probably the energy sector,” said Franks.
“Private sector credit growth is very weak; large scale manufacturing is positive, but very low; and we don’t see robust export growth,” observed Franks. He further said that while declining inflation is a good indicator, it is also worrisome because domestic demand continues to remain weak. He also criticised the government’s tax collection efforts, which he said are indicative of weaknesses in the economy.
Even though the IMF has projected a current account deficit of a low 0.7% of GDP, Franks warned that even this low level is dangerous due to drying foreign inflows. As a final blow, he also ruled out any restructuring of IMF loans.
He agreed that tough actions may cause a temporary drop in growth, but insisted that they were necessary for achieving macroeconomic stability.
Franks also hinted that the central bank should be made an independent part of plans for the new programme.
Published in The Express Tribune, January 19th, 2013.
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[BATMAN]

IMF has never been so kind in 65years history of Pakistan, as it has been to Zardari.

IMF has handed so much money to Zardari as it has not even collectively lent in Pakistan's 65+ years history.

Now Zardari is leaving and IMF is rescaling its position to old times.

Zardari a magic man indeed... but all those who are comfortable doing business with Zardari, must consider is reputation in Pakistan.

Some one need to ask IMF.. why they keep lending to corrupt people? and for what reasons? and what is the rules within IMF, while dealing with corrupt and risky people?

I think all agreements Zardari concluded, would be denied by the next govt.

It is not only the IMF who have sensed it but the bhartis are also upset for loosing Zardari.

You can see the OP is from a disappointed bharti!

 

[fast and furious]

IMF has never been so kind in 65years history of Pakistan, as it has been to Zardari.

IMF has handed so much money to Zardari as it has not even collectively lent in Pakistan's 65+ years history.

Now Zardari is leaving and IMF is rescaling its position to old times.

Zardari a magic man indeed... but all those who are comfortable doing business with Zardari, must consider is reputation in Pakistan.

Some one need to ask IMF.. why they keep lending to corrupt people? and for what reasons? and what is the rules within IMF, while dealing with corrupt and risky people?

I think all agreements Zardari concluded, would be denied by the next govt.

It is not only the IMF who have sensed it but the bhartis are also upset for loosing Zardari.

You can see the OP is from a disappointed bharti!

You have no idea about Economics,do you ?

 

[KRAIT]

For 65 years they had backing of US and then China, they got loans from IMF, WB and ADB and still they say the problem is due to external forces ?

Its time to see that it was constant failures of both democratic and military govt. to propel Pakistan's economy and their failure to use the strategic location and natural resources they are bestowed with.

 

[niaz]

In my humble opinion, the economy has grown complacent as a result of relying too much on foreign financial assistance to dig us out of the hole. Pakistan is now 65 years old; it is about time we learn to fly on our own.

Personally I would prefer that IMF refuses to lend money. Pakistanis will suffer for a while but there is no other way to learn to stand on our own two feet rather than on crutches.

It may be instance where being cruel is to be kind.

 

[Azazel]

In my humble opinion, the economy has grown complacent as a result of relying too much on foreign financial assistance to dig us out of the hole. Pakistan is now 65 years old; it is about time we learn to fly on our own.

Personally I would prefer that IMF refuses to lend money. Pakistanis will suffer for a while but there is no other way to learn to stand on our own two feet rather than on crutches.

It may be instance where being cruel is to be kind.

Its all about learning from the past.No country ever developed by relying on foreign financial assistance.Instead of that Pakistan should concentrate on attracting Foriegn direct investment.We had our IMF bailout in 1991 and learned the lesson.Pakistan should concentrate on an investment driven growth model not on an aid driven one.

 

[illusion8]

In my humble opinion, the economy has grown complacent as a result of relying too much on foreign financial assistance to dig us out of the hole. Pakistan is now 65 years old; it is about time we learn to fly on our own.

Personally I would prefer that IMF refuses to lend money. Pakistanis will suffer for a while but there is no other way to learn to stand on our own two feet rather than on crutches.

It may be instance where being cruel is to be kind.

One of the biggest investments offered to Pakistan which was rejected was of 2 billion $ by an Indian firm in your coal fields, people need to separate economy from geo politics.

 

[AZADPAKISTAN2009]

We don't need IMF loan

 

[truthseeker2010]

IMF has never been so kind in 65years history of Pakistan, as it has been to Zardari.

IMF has handed so much money to Zardari as it has not even collectively lent in Pakistan's 65+ years history.

Now Zardari is leaving and IMF is rescaling its position to old times.

Zardari a magic man indeed... but all those who are comfortable doing business with Zardari, must consider is reputation in Pakistan.

Some one need to ask IMF.. why they keep lending to corrupt people? and for what reasons? and what is the rules within IMF, while dealing with corrupt and risky people?

I think all agreements Zardari concluded, would be denied by the next govt.

It is not only the IMF who have sensed it but the bhartis are also upset for loosing Zardari.

You can see the OP is from a disappointed bharti!

Sir are you sure Zardari is going?

 

[karan.1970]

In my humble opinion, the economy has grown complacent as a result of relying too much on foreign financial assistance to dig us out of the hole. Pakistan is now 65 years old; it is about time we learn to fly on our own.

Personally I would prefer that IMF refuses to lend money. Pakistanis will suffer for a while but there is no other way to learn to stand on our own two feet rather than on crutches.

It may be instance where being cruel is to be kind.

And you need people who think like above at the helm of affairs...Short term pain for long term gain...

 

[rollercommando]

IMF, World Bank, Asian Development Bank are all rapist's.

 

[RescueRanger]

 

[KRAIT]

In my humble opinion, the economy has grown complacent as a result of relying too much on foreign financial assistance to dig us out of the hole. Pakistan is now 65 years old; it is about time we learn to fly on our own.
Personally I would prefer that IMF refuses to lend money. Pakistanis will suffer for a while but there is no other way to learn to stand on our own two feet rather than on crutches.
It may be instance where being cruel is to be kind.

Sir it will be the poor who will suffer. The rich people and landlords will be living with same luxuries. The desperation of common man will increase and what we saw at people turn out for Qadri, we can expect more will follow anyone who sells them idea of basic amenities.

This is a dangerous situation. Also economic stability is much more important for Pakistan right now considering the internal issues it is facing. If economy deteriorates because Pakistan don't get loans from monetary institutions like IMF, WB, ADB etc., things will spiral out.

Right now Pakistan needs these loans and also bring economic changes like increasing tax collection and bill payment.

 

[Bobby]

We don't need IMF loan

because IMF is not going to give any loan to Pakistan....

last 65 years Pakistan is taking loan and living on loans....

 

[Developereo]

In my humble opinion, the economy has grown complacent as a result of relying too much on foreign financial assistance to dig us out of the hole. Pakistan is now 65 years old; it is about time we learn to fly on our own.

Personally I would prefer that IMF refuses to lend money. Pakistanis will suffer for a while but there is no other way to learn to stand on our own two feet rather than on crutches.

It may be instance where being cruel is to be kind.

I didn't want to say it because I am living outside Pakistan but, as they say. you have to hit rock bottom before you start turning around.

Pakistan has fundamental societal problems that need to be addressed. The chalta hai attitude has let Pakistan squeak by for 65 years, but it can't last forever. Even Pakistan's allies, including the Saudis and the Chinese, are showing signs of frustration.

Pakistan needs a serious revolution, like the French Revolution or the Arab Spring, to leave the medieval feudal setup and move into the 21st century.