Pakistan fails to satisfy IMF

Pakistan's economy remains extremely fragile

By Business correspondent Mark Gregory

Senior officials from the International Monetary Fund have left Pakistan with no sign of an agreement to release much-needed new credits.

The latest round of talks was overshadowed by the revelation that previous governments in Pakistan have misled the IMF on the true state of the country's public finances.

Pakistan is urgently seeking the release of a new tranche of loans and credits that were agreed in principle more than a year ago.

But the IMF has refused to release the money, until the Pakistani Government commits itself to economic reforms that would stabilise the public finances by raising tax revenues.

Misleading figures

A deal now seems further away than ever, after it emerged that successive administrations in Islamabad have gone to considerable lengths to obscure the real level of the gap between government revenues and expenditure.

Finance Minister Shaukat Aziz is in Washington for talks

The military government of General Pervez Musharraf says that it has taken the initiative to inform the IMF of events which it says happened before it took power in October's coup.

The government now says it will review, and if necessary amend, its assessment of budget deficits dating back to 1990.

But it is unclear whether this will be enough to placate the fund, which has made no public comment on the issue.

No breakthrough

Further discussions are likely to take place on the sidelines of the IMF's forthcoming spring meeting in Washington, but no-one is holding out hopes of an early break in the deadlock.

Pakistan's economy remains extremely fragile in the wake of the international sanctions imposed after the country's first nuclear tests nearly two years ago.

The government in Islamabad has been given until the end of this year to reach an agreement with the Paris club of major donor nations on the long-term rescheduling of debts.

But it will be unable to meet this deadline unless it first reaches agreement with the IMF.