`IMF wants Pak Prez to endorse new bailout plan`

The International Monetary Fund is wary of inadequate reforms and under-utilisation of resources by Pakistan in the past.

Updated: Aug 09, 2012, 16:15 PM IST

Islamabad: The International Monetary Fund wants President Asif Ali Zardari to endorse a new bailout programme for Pakistan as it is wary of inadequate reforms and under-utilisation of resources in the past, a media report said on Thursday.

"Active political support is required at the highest level to implement essential reforms in Pakistan ... It will be worthwhile to consider the President for co-signing the letter of intent (for any future arrangement)," IMF`s post-evaluation draft report for a new USD 11.3 billion bailout programme was quoted as saying by The Express Tribune.

A letter of intent states the policies a borrowing country intends to implement with the help of its financial assistance.

It is a standard practice for a recipient country’s finance minister to sign the letter of intent on behalf of the government and the central bank’s governor.
A former State Bank of Pakistan chief told the daily that Presidents never sign letters of intent.

The LoI signed in 2008 was administered by then Finance Minister Shaukat Tarin and former State Bank governor Shamshad Akhtar.

The IMF programme met an untimely end in 2010, with two tranches worth USD 3.4 billion not disbursed due to Pakistan’s inability to honour written commitments.

The reforms that Pakistan did not implement were related to the introduction of a general sales tax regime and ensuring fiscal consolidation and autonomy of the State Bank of Pakistan.

An IMF delegation held an informal meeting with Army Chief Gen Ashfaq Parvez Kayani and sought guarantees for implementing crucial reforms in case Islamabad decides to initiate another bailout programme, sources in the Finance Ministry told the daily.

Analysts contended the IMF’s move undermines Pakistan’s economic managers and is an insult to the office of the President.

"Asking the President to co-sign the letter of intent is not only an insult to the country and the office of the President, it also means the IMF has no confidence in the Finance Minister and his ability to deliver," said Ashfaque Hasan Khan, a former special secretary of the Finance Ministry.

Finance Ministry spokesman Rana Assad said he was not authorised to comment on the contents of the post-evaluation report and that the Finance Secretary might be in a better position to respond to queries.

However, a senior Finance Ministry official blamed Finance Minister Abdul Hafeez Shaikh for the "embarrassing situation".

"Shaikh showed the President’s door to the IMF during the fourth review of the last unsuccessful programme in Doha (Qatar). The minister advised IMF’s mission chief to meet the President personally regarding assurances on implementation of reformed general sales tax. Shaikh and the chef de mission then flew to Islamabad to meet the President," the official said.

In accordance with IMF’s cautious stance, a delegation comprising its Middle East and Central Asia director Masood Ahmed and new mission chief for Pakistan, Jeffery Franks, held meetings with stakeholders in the last week of July.

While IMF’s meeting with the Army chief is said to be the most important in the string of huddles, the delegation also met leaders of the PML-N, Pakistan Tehrik-e-Insaf and Muttahida Qaumi Movement.

Pakistan is eager to explore the possibilities of another IMF programme but the world body is reluctant to enter into any agreement with an interim government in Pakistan.