Jan 27 - Feb 02, 2003 



The IMF mission which came to Pakistan last week to conduct a review of economy before release of the next tranche under Poverty Reduction and Growth Facility (PRGF) programme felt highly satisfied after its meeting with the President and the Prime Minister, Mir Zafarullah Khan Jamali in Islamabad.

It is now almost certain that the 5th tranche of 114 million US dollars will be released by next month after its formal approval by the IMF Board of Directors.

A high profile team of IMF headed by George Abed, Director Middle East Department of Fund arrived in Islamabad on Friday last to hold talks with the Prime Minister and his economic team on the future direction of reforms, shape of PRGF programme and seek commitment to carry out agreed structural measures with all the International Financial Institutions. Before meeting the Prime Minister, the Country Chief of Fund in Islamabad had indicated that IMF wanted an assurance for continuity of reforms from the civilian head of the government. "Outcome of the talks with the Prime Minister would determine the schedule of the next executive board meeting", he said adding that "the team would discuss the future strategy of the political authorities and would listen how they want to move forward".

Addressing a joint press conference with PM's Advisor on Finance, the IMF mission head said that they were fully satisfied with the assurances provided by the President and the Prime Minister and his economic team regarding continuity of reforms. The IMF board will meet next month to consider the release of 5th tranche under the PRGF. He said that the Fund was pleased to see the 3-year economic performance of the country and the firm resolve of the elected government to carry out structural reforms to consolidate the gains and improve the life of people.



In December 2001, the IMF had approved a 3-year PRGF programme of about $1.5 billion for Pakistan and the country has already drawn $454 million. The next tranche of about 114 million was due in January but got delayed due to political transition in the country.

During their meeting, the Prime Minister reaffirmed commitment to follow the IMF calls or adhering to agreed reform agenda. "We believe in continuity of reforms", said Prime Minister Mir Zafarullah Khan Jamali. "We will make efforts to create employment opportunities through promoting higher investment and growth", he said.

The Prime Minister underscored the need for continuation of consistent and transparent economic policies, completion of the on-going structural reforms, better law and order, and stressed to remain financially responsible, according to an official handout. Jamali said the government would build upon the foundation laid by the previous regime, and would strive for higher economic growth, so that the fruits of development could trickle down to common man.

George Abed, on is first visit to Pakistan after replacing Paul Chabrier, is a Palestinian and Jordanian national, and had also worked in the fiscal policy department of the Fund.

"If Pakistan continues to stay on path of reforms, it would further stabilize macro-economic stability, increase growth rate, which in turn would generate economic activity and help reduce poverty", he said.

The IMF mission chief, however, pointed out that there were many difficulties and challenges ahead, like in the power sector, where Wapda and KESC needs major reforms, and necessary environment to ensure their privatization. The government, he said, was still constrained by high poverty rate, as it was still a poor country needing to develop. "We and the authorities know we have not done enough yet".

He said the government would not be able to reach the target of Rs.161 billion poverty-related expenditures this year. But the government was determined to get as close to that target as possible, so that the benefits of the government spending reach the poorest of the poor. He, however, acknowledged comparatively higher allocations for poverty alleviation efforts this year.



Abed supported higher spending, within the agreed fiscal limits, on pro-poor social sector projects, including education and health, and endorsed the Prime Minister's welfare scheme of Rs. 5 billion, as a social safety net for the poor and vulnerable segments of the society.

He, however, suggested that the role of the national saving organizations should be reformed and modernized, separating its social security aspects, from that of a saving organization. He recommended broad-based reforms in the structuring and design of various products to make them consistent with the overall direction of reforms. He, however, was not averse to the cushion provided to the pensioners.

George Abed underscored the need for maintaining fiscal discipline, as it would help reduce the debt levels, and attain sustainable and higher growth rate of 6 per cent in the next few years. In this regard, he emphasized that all relief efforts should stay within the available fiscal room. The government had reassured the fund to keep the budget deficit at the agreed limit of around 4.67 per cent of the GDP.