Pakistan's IMF talks 'on course'

Pakistan's economy is struggling and needs outside help

By Nadeem Malik in Islamabad

Talks between Pakistan's military government and an IMF delegation to discuss further financial aid are "going in the right direction", according to official sources in Islamabad.

The IMF delegation arrived in the Pakistani capital earlier this week.

Pakistan is seeking a substantial new package from the IMF under its poverty reduction and growth facility, which would also pave the way for further debt rescheduling by official bilateral creditors in the Paris Club.

Government sources say Pakistan needs more financial support from the IMF to help it with its difficult economic situation.

After years of resource starvation, the country has a daunting task meeting its international debt obligations in the coming years.

Structural changes

Independent economists reckon that Pakistan requires $5bn per annum in new commitments to be able to be able to service its $38bn external debt.

However, the fund management has not put any value on the possible size of a new package.

The size of a new package is not known

Officials from multilateral agencies suggest that the fund has asked the military government to move swiftly to introduce all the required structural adjustments in order to qualify for more money.

Senior government officials have highlighted downsizing the administration, fast-track privatisation, deregulation of the oil, gas and agriculture sectors, extending the sales tax base, and large allocations for the social sector to tackle worsening poverty as the possible components of the new programme.

Strategic issues

The IMF delegation has also discussed a new approach for strict monitoring of all measures after the military government reported that the deposed government of Nawaz Sharif understating the budget deficit during last two fiscal years.

However, the former Finance Minister, Sartaj Aziz, has denied this charge.

Independent analysts believe that concessions on certain geo-political issues could win back outside support.

The resolution of regional disputes, progress on the issue of non-proliferation and settlement of disputes with foreign investors in private power projects are regarded as key priorities for the international community, particularly the United States.