KARACHI: Nathan Porter, director of the International Monetary Fund’s (IMF) mission for Pakistan, has stated that the current IMF programme for the country could be its last if it acts on the IMF’s economic advices in letter and spirit.
In an interview with the Voice of America, Porter discussed obstacles to Pakistan’s economic progress, the IMF’s role in Pakistan’s economic policy and reasons for declining foreign investment in the country.
After the IMF’s approval of the debt programme, Prime Minister Shehbaz Sharif stated that this would be the last debt programme of Pakistan. Commenting on this, the IMF mission director stated that this could be possible if Pakistan sincerely acted on economic reforms.
He was of the view that after the economic uncertainty that Pakistan faced in the middle of 2023, the country was seeing economic stability that could provide a foundation for economic progress.
Porter said the IMF would try to ensure that Pakistan retained a strong macro exchange rate and fiscal and monetary policies along with liberalising its economy enabling the private sector to contribute to the country’s economic development.
To a question about the future of the IMF’s 24th debt programme for Pakistan, Porter said the first review of the ongoing debt programme would start in December and probably by March or April, it would be sent to the board.
The Pakistani government and some economic experts have stated that the IMF imposed strict conditions on the country for the current programme. Recently, Pakistani Finance Minister Muhammad Aurangzeb also stated that owning to trust deficit, the IMF had put strict conditions on Islamabad for the debt programme.
Porter, however, disagreed with such claims. He said the IMF considered issues of the country whenever it came up with a programme for any country and recommended their solutions. He said the programme for Pakistan was devised in a similar manner and it was not very strict.
He recalled that when the IMF initiated its last programme, inflation was very high in Pakistan along with a high deficit in the current account. He said no economic progress was happening and the programme intended to stabilise the country’s economy, and met success.
Regarding the Chinese loans to Pakistan, he said China was a major economic partner of Pakistan and the IMF’s stance on Chinese loans to Pakistan was not different from its stance on the loans of other countries.
The IMF has told Pakistan to take some steps for its agricultural sector. According to reports, the IMF’s recommendations include ending the support price system for food and subsidies on agriculture. Commenting on this, Porter explained that there was evidence that the support price benefitted wealthy and big farmers but small farmers actually faced difficulties due to it.
He said such schemes resulted in debt increase that was to be borne by the provinces and last year, the support price scheme actually caused an increase in the flour price.
To a question about economic burden on the people of Pakistan as a result of adopting the IMF’s policies, the mission director said Pakistan needed to make its tax system effective and fair, for which steps had been taken in this year’s budget.
He said if the agriculture system, and retail and property businesses paid taxes, it would decrease the burden on the common people and the country would have funds to spend on their welfare.
Discussing less foreign investment in Pakistan, Porter said unnecessary government intervention in businesses had been hampering foreign investment.
He remarked that Pakistan was a major market and potentially a large labour force but sometimes it was not considered an attractive destination for investment.
He was of the view that some basic steps were required to improve investment in the country such as minimal involvement of the government in the businesses and reviewing the government’s powers on implementing tariffs and prices.
In addition to them, he called for reforms in government institutions, privatisation of some them and taking steps to decrease the cost of power generation to boost investments.
For some days, the media has been reporting the government’s decision to not set up more special economic zones that were earlier established for providing subsidies and concessions to industries and businesses. The IMF, however, does not consider offering such incentives helpful for meeting economic targets.
He opined that subsidies and concessions weakened businesses and lessened the prospects of growth.
He said the government’s job was to just provide the basic skeleton for the businesses. The IMF would soon release a detailed report in this regard.