WASHINGTON: Pakistan’s homegrown reform program is showing clear signs of economic stability after the country took some painful decisions under the most difficult environment, Adviser on Finance Shaukat Tareen said as he met with top financial leaders at the annual World Bank-IMF spring gathering. He said Pakistan has met all the benchmarks of the International Monetary Fund program and is now committed to reform for which the government has already rolled out a roadmap envisioned under the Nine Points Framework.

Tareen is heading a top-level Pakistani delegation, which Friday met with the Asian Development President Haruhiko Kuroda, Executive Vice President of Multilateral Investment Guarantees Association, Vice President World Bank Isabel Guerrero and Sector Directors, Finance Minister of Saudi Arabia, H.E.

Ibrahim Abdulaziz Al-Assaf, Director Middle East and Central Asia Department IMF.

Their discussions touched on a range of economic matters with a particular focus on exploring opportunities for MIGA guarantees for trade financing, investment in power sector and capital raising for infrastructure, investment pipeline by the World Bank for Pakistan, public and private investment by Saudi Arabia in Pakistan and a review of the Fund program. Tareen told his interlocutors:

“We recognize that key area that would help in consolidating our early successes is the tax policy and administration reform going forward. We are working on a plan of action to expand the tax coverage and improving both the tax-to-GDP ratio as well as domestic savings to investment ratio to reduce our reliance on foreign borrowings,“We now need to focus on growth and investment in agriculture, water and power, infrastructure and poverty alleviation and institutions strengthening.”

The adviser to the prime minister emphasized it is important to expand public and private sector investment while maintaining macroeconomic stability to create job opportunities and improving public service delivery.

The government, Tareen stated, accords a high priority to human resource development and will therefore focus on better education and health facilities for the people. “We plan to work on demand based skill development that will enable Pakistan to avail job opportunities overseas.”

The adviser thanked the World Bank, Asian Development Bank and Saudi Arabia for their generous support during the Friends of Democratic Pakistan conference in Tokyo earlier this month. He emphasized the importance of finalizing preparation of programs and projects that are in the pipeline for early implementation.

Tareen also urged the World Bank for fast-tracking the preparation of Country Assistance Strategy for 2010-2013 in consultation with the Government of Pakistan. He also represented Pakistan at the G-24 meeting of ministers and discussed global economic and financial conditions, their impact on Pakistan economy and policy responses of the IMF and World Bank.

Minister of State for Finance and Economic Affairs Hina Rabbani Khar, Governor State Bank Syed Salim Raza, Secretary Finance and Secretary Finance and Economic Affairs and Minister Economic at the Pakistani embassy are part of the delegation participating in the annual meetings of the global financial institutions.-APP

The G20 agreement has been hailed by world leaders as a “historic” moment, which will help bring the world out of the recession that has caused so much misery and anxiety for people across the globe. This may well be the case and of course it may not. Twenty years from now maybe we will see if the decision made on Thursday to pledge one trillion dollars to end the recession was a bold and brilliant move or a colossal collective mistake.

The G20 agreement has been hailed by world leaders as a “historic” moment, which will help bring the world out of the recession that has caused so much misery and anxiety for people across the globe. This may well be the case and of course it may not. Twenty years from now maybe we will see if the decision made on Thursday to pledge one trillion dollars to end the recession was a bold and brilliant move or a colossal collective mistake.

Right now it is very difficult to say if it truly is a “historic” event. We do have, however, every right to hope that it will be in a positive way and perhaps we can celebrate the way that nations came together to work to solve each others? problems. The G20 summit also saw a coming together of a very different kind, however. Tens of thousands of people took to the streets to protest during the summit and by no means all of these people were there, simply because they had lost their job.

There were also climate change protestors and anti-war protestors as well as violent anarchists who became embroiled in bloody fights with the police and manage to smash up a branch of Royal Bank of Scotland. This shows us that the world still has many problems besides the economy, problems which cannot be fixed by IMF funding, fiscal stimuli, interest rate cuts or financial regulation.

Some have argued that the current crisis shows that capitalism and free market economics have failed. The anarchists in particular must have felt that this was their moment to prove that they were right all along. Certainly the current crisis has shown us that the system is not perfect. Capitalism is a man-made system and as such it is vulnerable to the same weaknesses that inherent to man.

Two little things kept coming to mind over the weekend: the idea that the UK might have to go back to the IMF; the reluctance of the US to wipe out bond holders.

These articles in the Telegraph (never that worried about the truth when it comes to Labour policy screw ups…) paints a pretty grim picture. Gordon Brown, having just hosted a summit which agreed to allocate $1.1 trillion to the IMF, is reportedly considering asking for a loan. Quite how it will be possible to spin (oh, how I hate that word!) that to not give the impression that the UK has attained Banana Republic / South American levels of failure is beyond me.

It has been nauseating enough watching minister after minister come out with the same line about this being an „international crisis, that originated in the U.S. credit markets?, but the idea of them coming out with some crap about it being merely a precaution to insure the stability of the economy, and not at all a mark of shame…

A UK politician once said: “A country would only go if they were in a very bad state”. It was a bit like going to accident and emergency to get urgent help. And now when they need help of IMF, their idea is that, “This new facility will not be like that. It is a bit more like getting wellbeing care or even like going to a spa to recuperate.” If the IMF starts handing out money with no strings attached to the UK, can you imagine what the likes of Argentina, Belarus, Iceland and Pakistan etc. are going to do?

The issue of the US reluctance to wipe out bond holders is, I suppose, somewhat related. As has been obvious for a long time, many of the largest financial institutions / banks of America are insolvent. In normal circumstances they would be put into receivership / bankruptcy proceedings.

The stockholders would be wiped out, and the bondholders would be made whole to the extent that value could be extracted from the remaining assets. For example, the customers / deposits of a bank could be sold to another bank, and the proceeds used to pay off some section of the bond holders. Obviously, as the bank is insolvent, there will be a gap between the value of the assets and the outstanding debt. This gap defines the „haircut? that the bond holders take.

All very normal… but it?s not happening. The official word is that these institutions are “too big to fail” (obviously wrong, their debts are so large that the opposite is true – they are too big to be allowed not to fail!) To a certain degree this makes sense; the fear is that the failure of one of these institutions will trigger events (think derivatives…) that will cascade, causing other institutions to fail (also the stated reason for saving AIG, although it becomes increasingly clear that AIG is actually just a conduit for stuffing money into the bank system). This same argument is used to explain what happened when Lehman Brothers went under, but it?s not very convincing – mostly because not very much did happen when Lehman Brothers failed. The bankers may be venal, but they are entirely stupid – a lot of the Risk was hedged.

All of which raises the question: why not do what the law says should be done with insolvent banks – put them into bankruptcy?

My answer is that the US is trying to play a dangerous waiting game, that involves them attempting to increase the amount of debt in the short term, with the hope that the economy will recover, and they?ll be able to pay off the debt in the long term. In such a situation the last thing you want to do is piss off the people who are lending you money. And, unfortunately the people who have already lent you money are the ones you?re going back to cap in hand. When the Chinese talk about America “guaranteeing the safety of their investment” this is what they are saying, “promise to payback the stuff you owe us or we?ll send you to the poor house!”

It will be no surprise to hear that I don?t think that there is a hope in hell of the UK avoiding another (humiliating) trip to the IMF (and not learning anything from it, just like last time). Or, that it doesn?t seem possible for the US to keep enough money in the debt bubble for as long as it will take for all the issues to work through the system. There are many people who don?t believe that housing prices will stabilise for at least three years. Just think what that is going to do to the return on all those mortgage backed securities. Unemployment is going to continue to rise for at least another year. Just think how many more homes that are going to push in to foreclosure.

The UK might actually have the better of this deal because it?s economy is small enough to be bailed out. The US seems like it is going to have to stop messing about and face the music… it?s coming regardless.

WASHINGTON: Pakistan will receive US $ 1.4 billion by Tuesday including US $ 500 million interest?free credit loan from the World Bank (WB) for Poverty Reduction and Economic Support Program and $ 840 million from the IMF following successful first review of the Stand By Arrangements signed last November 2008 meeting all the targets.

This is an encouraging sign for economic stabilization efforts of the Government and reflect increasing confidence of the international institutions. The transfer will bolster Pakistan’s foreign exchange reserves and help Pakistan in having its credit rating revised upward by as well as enhancing investors’ confidence both at home and internationally.

In this regard, Ambassador Husain Haqqani had an extensive meeting with World Bank Vice President Ms Isabelle Gueroro in Washington, Monday and appreciated WB’s support to Pakistan’s endeavors in economic stabilization and early recovery. The World Bank Vice president assured Ambassador Haqqani of the Bank’s continued support.

The targeted project under Wrold Bank credit? Poverty Reduction and Economic Support Operation seeks to benefit the poor people, reforming the tax administration and is also expected to strengthen Pakistan’s competitiveness.-APP

ISLAMABAD: Pakistan is likely to get second tranche of US $840 million from the International Monetary Fund (IMF) by the end of this month, official sources said. The International Monetary Fund, under Standby Arrangements, had approved US $ 7.6 billion to Pakistan out of which the first tranche of US $ 3.1 billion was received in November, 2008.

Following the successful quarterly review meetings held in Dubai recently, Pakistan would get US $ 840 million by end of March, sources said adding that the review meeting had appreciated Pakistan’s home grown economic stabilization policies.

“The IMF has expressed its satisfaction over the progress of Pakistan’s economic performance in first quarter of the year and also agreed the projected economic targets in the next six months of the current financial year and consented that the progress of Pakistan’s IMF programme is on track”, the sources added.

Pakistan also aims to lobby for enhancing IMF loans for the country, the sources said. During the IMF Executive Board meeting scheduled to be held in April, Pakistan would also negotiate and lobby for enhancing five to eight times the IMF funding quota for the country, the sources added.

It may be recalled that IMF staff mission, led by Adnan Mazarei had visited Islamabad and Dubai to conduct the 2009 Article IV consultation and the first review under Pakistan’s Stand-By Arrangement (SBA).

The SDR 5.169 billion (about US$7.6 billion) SBA was approved by the Executive Board of the IMF on November 24, 2008 and a first disbursement of SDR 2.067 billion (about US$3.1 billion) was made on November 26, 2008.

The IMF mission held extensive discussions with government and central bank officials, focussing on Pakistan’s recent economic performance, the main challenges lying ahead, and the policies needed to build and consolidate macroeconomic stability in light of the uncertain and deteriorating global economic environment.

The mission was impressed by the authorities’ strong resolve to sustain prudent macroeconomic policies, strengthen and broaden the social safety net, and pursue reforms to enhance Pakistan’s medium-term growth prospects.

“The authorities’ program remains on track. Initial developments since the approval of Pakistan’s IMF-supported program have been generally positive, and all the program’s quantitative performance criteria for end-December 2008 were observed.-APP

ISLAMABAD: Advisor to Prime Minister on Finance and Economic Affairs Shaukat Tarin said on Monday that the International Monetary Fund (IMF) review meeting in Dubai has appreciated Pakistan’s home grown economic stabilization policies and the country would get second tranche of US $ 840 million by the end of the current month.

He stated this at a news conference here at the Media Centre of the Press Information Department, which was also attended by Secretary Finance Dr.Waqar Masood Khan and Principal Information Officer (PIO) Shabbir Anwar. Shaukat Tarin said that IMF under Standby Arrangements has approved US $ 7.6 billion for Pakistan out of which the first tranche of US $ 3.1 billion was received in November, 2008 while after the successful quarterly review meetings held in Dubai recently Pakistan would now get second tranche of US $ 840 million.

He said that Pakistan would negotiate and lobby for enhancing IMF funding quota from 5 times to 8 in the IMF Executive board meeting to be held in April this year. Shaukat Tarin while linking economic stability to political stability called upon all the political forces to play their role in the achievement of the objective for the socio-economic prosperity of the country.

He said when there would be political stability in the country huge investments in different sectors would come, generate economic activities and create job opportunities. The Advisor to the Prime Minister on Finance however said that Pakistan’s political situation did not come under the discussion of IMF review meeting.

Shaukat Tarin said that Pakistan plans to attract investments of Pakistanis living abroad by giving them incentives in the country for their investments. He added that due to government’s economic stabilization programme the macro economic indicators are improving and investors are bringing back their investments and capital in Pakistan.

Workers remittances are also increasing at the rate of 18 percent, he remarked. Terming inflation the biggest enemy for the people, especially the poor he said efforts are being made to bring it down to 10 percent by end of the current fiscal year.

Advisor to the Prime Minister on Finance and Economic Affairs, Shaukat Tarin said that when he took over the charge of his office, the foreign exchange reserves were declining due to the turmoil in the international markets. He added that in this situation Pakistan has no other option but to go to friends, multilateral agencies including IMF.

He further said that due to deterioration in our macro?economic indicators, the multilateral agencies including the World Bank and others were very reluctant to give us funds before going to the IMF. Shaukat Tarin said “Our own targets for stabilizing the economy were also very aggressive” and to achieve the targets were skeptic for our own friends”.

He said that we were lucky enough for negotiating with the IMF on Pakistan’s own terms except one which was raising of the interest rate by 2 per cent. He further said that during current financial year fiscal deficit would be reduced to 4.3 per cent.

Shaukat Tarin said that IMF has agreed to reduce interest rates, if the inflation in the country comes down. He said that the foreign exchange reserves have increased to over US $ 10 billion in the country while there is also marked improvement in the performance of our stock market.

He added that projected growth rate during the current financial year was 3.5 percent but the target has been reduced to 2.5 percent. The Advisor to the Prime Minister on Finance said that this year country has achieved good wheat and rice production, however there is low growth in the manufacturing sector besides global recession impacting on our exports.

He added that decline in the export has also put a negative impact on our balance of payment position. He said that Federal Board of Revenue is also facing the shortfall in the revenues and tax to GDP ratio during current financial year would be at 10 percent. He said that revenue target of Rs.1360 million has been reduced to Rs.13 billion for the current financial year, however, stressed the need for broadening of the tax base in the country for reducing fiscal deficit.

He expressed the hope that government would be able to achieve its economic targets adding that measures are being taken to reduce the Current Account Deficit. He added that by the year 2010?11 the economy of the country would further be strengthened and improved.

Shaukat Tarin said that the decreasing trend in the oil and food prices in the international market would provide a cushion and relief for further improving the national economy.He said under the nine?point economic agenda, the government would ensure alleviation of poverty, promotion of agriculture, manufacturing, human resource development, public?private partnership (PPP) improving the efficiency of government functionaries and energy stabilization on sustainable basis in the country.

He added that government has introduced Banazir Shaheed Income Support Programme for provision of safety net to the poorest section of the society and plans to further extend it. He said that government is providing sugar at Rs. 38 per kg through Utility Stores Corporation (USC) and ECC has also allowed the import of the commodity for stabilizing the prices of sugar in the country.

He added that government is providing Rs. 65 billion subsidy on electricity annually to the consumers. He said that PEPCO has been asked to improve its efficiency. He added that in case of any decision in the withdrawal of the subsidy government would not put a heavy burden on the public in the tariff rates. Replying to a question, he said Pakistan would get US $ 1.1 billion under Coalition Support Fund from the United States shortly for fighting war against terror.-SANA

KUALA LUMPUR: International Monetary Fund (IMF) has said that the advanced economies are already in a depression and the financial crisis may deepen unless the banking system is fixed. Addressing to a gathering of the central banks from Southeast Asia IMF Managing Director Dominique Strauss-Kahn said on Saturday “the worst cannot be ruled out, there’s a lot of downside risk.”

Ten days ago, the IMF cut its world-growth estimate for this year to 0.5 percent, the weakest pace since World War II. Stimulus packages alone won’t succeed in dragging the global economy out of recession unless confidence is restored in the banking system, Strauss-Kahn said .

“All this will work if, and only if, the different countries are likely to do what they have to do in terms of restructuring the banking sector,” he said. “And today it’s not done.”

The U.S. economy has lost 3.57 million jobs since a recession started in December 2007, its biggest employment slump of any economic contraction in the postwar period as companies from Macy’s Inc. to Caterpillar Inc. cut costs. The U.K. economy will shrink this year by the most since 1946, the IMF forecasts.

“There is hope that the fiscal and monetary stimulus measures being implemented around the world can help turn things around,” said David Cohen, Singapore-based director of Asian economic forecasting at Action Economics. “But there is still the risk it can be short-circuited by further financial turmoil.”

Islamabad: The farmers of NWFP have rejected the conditions of IMF and amendments in the Seed Act terming it in the interest of multinationals and against the poor farming community. They have vowed to resist every move aimed at suffocating the already ailing sector. The growers say that they would not accept any decision until the powerful agri-mafia is eliminated and they are provided level playing field.

A delegation of Ittehad-e-Zamindaran-wa-Kashtkaran NWFP comprising its SVP Haji Bashir Khan, VP Ishfaq Khan Omarzai, GS Zahir Khan, Information Secretary Dr. Khail Muhammad Khial and others met Dr. Murtaza Mughal, President, Pakistan Economy Watch at his office.

To resist every move until mafia is eliminated, WTO’s slavery unacceptable
They said that agriculturally illiterate officials are taking wrong decisions. Faulty statistics and incorrect surveys are adding to the problems. Amendments in the Seed Act 1976 have been planned while keeping supreme the interests of powerful companies operating in several nations, they alleged. We reject slavery in the name of WTO.

Haji Bashir said central and provincial governments have ignored NWFP and peasants are being cheated in the name of new policies, products and subsidies. There is nothing on ground and the rural community is completely on the mercy of ruthless and greedy private sector.

Whole agricultural chain and sub sectors have been hijacked by middlemen who have emerged as decision makers in almost all the important matters. These sharks have paralysed whole system.

Scarcity of water, spurious insecticides and pesticides, high-price of urea, fertilisers and other inputs, unabated smuggling and deteriorating law and order situation have proved to be fatal blow for the community. There is no difference between present and former government and the situation may force hapless peasants to carry weapons, they warned.

During meeting, Dr. Murtaza Mughal said that the policies framed in the name of farmers have proved to be a good income generating resource for officials, intermediaries and industrialists. “Every government raises attractive slogans for farming community but later exploitation reins,” he said adding that our experts have never demonstrated ability or interest in agriculture or its sub sectors.-Pak Economy Watch

ISLAMABAD: International Monetary Fund (IMF) said that Pakistan needs more financing urgently to strengthen its resilience to potential shocks, help finance the expanded social safety net, and allow for higher spending on development programmes. In an analysis of the country’s economy, the Board has appreciated the steps taken by the present government to address the challenges confronting the country.

It said that Pakistan’s economy is at a critical juncture. Inflation has doubled and is now running at 25 per cent, the value of the rupee has fallen by a third since March, and foreign exchange reserves are down to worrying levels. All this is occurring against the backdrop of the worst international economic crisis in sixty years.

These are precisely the type of circumstances in which the 185 members of the IMF look for support from this cooperative institution. And so did Pakistan resulting in the approval on November 24 by the IMF’s Board of Directors of a $7.6 billion loan in support of the authorities’ economic stabilization programme.

How does the IMF see the economic and financial challenges facing Pakistan and how can it help to address them, in this regard it is stated that the first point to stress is that overcoming the current economic crisis will require hard choices and sustained action over the coming year. Fortunately, the strategy set out by the government, on which the IMF’s support is based, provides a sound basis for action.

First, restore overall economic stability and confidence by acting on key macroeconomic imbalances which means reducing the unsustainably high fiscal deficit and tightening monetary policy to bring down inflation and strengthen foreign exchange reserves.

Secondly, the adjustment programme must be designed in a manner that ensures social stability and adequate support for the poor. A second point is that while the necessary macroeconomic tightening will clearly involve some pain, it is important that the burden of adjustment should fall least on the most vulnerable members of Pakistani society.

And that is why for the IMF it was crucial that the government’s programme includes key social protection measures. Expenditure on the social safety net will be increased to protect the poor through both cash transfers and targeted electricity subsidies.

Thirdly, it is important to point out that the programme and its conditionality is based on the targets and measures that the authorities have them set for the next two years. The IMF is convinced that the best-implemented programmes are the ones that are home grown and fully owned by the country.

Fourthly, the success of the programme hinges on sustained and forceful implementation. Strong and determined implementation of the reforms included in the programme will allow the country to get its economy back on a sustainable path. Strengthening public sector institutions and governance will need to be a key dimension of this effort.

In this respect, building domestic consensus around the measures included in the authorities’ package constitutes a key factor in the period ahead. Finally, while the key to success lies in the hands of the government and people of Pakistan, the international community also needs to support these efforts. To this end, the financing from the IMF will help to ease the path of adjustment and will provide a strong signal of support to the international community.

Other international agencies and bilateral donors are also providing support, but more financing is urgently needed to strengthen Pakistan’s resilience to potential shocks, help finance the expanded social safety net, and allow for higher spending on development programmes. The IMF stands ready to participate in any donor meeting. Working together, we can help Pakistan revitalize its economy and protect the poor during these difficult times.-SANA

ISLAMABAD: Adviser to Prime Minister on Finance and Economic Affairs, Mr. Shaukat Tarin held a meeting with Ambassador of France, Mr. Daniel Jauanneau on Friday. Mr. Shaukat Tarin briefed the Ambassador on GOP’s Nine Point agenda that principally focuses Economic Stabilization Plan and over all restoration of economic health in view of ongoing global financial crisis that has regional overtones. Both the sides exchanged views on mattes relating to bilateral economic cooperation and expansion of trade related ties between the two friendly countries.

Currently Pakistan was working on enhancing tax-to-GDP ratio in order o meet domestic economic policy requirements. Pakistan has finalized its homegrown economic stabilization programme that has been endorsed by IMF and appreciated by Friends of Pakistan. Pakistan was working hard to gear up its domestic economic policies in a manner that (firstly) imbalances in domestic economy are addressed and (secondly) it is placed on a fast-tracked development pace, Mr. Shaukat Tarin added.

GOP was putting in place an indigenous revenue generation plan that brings all sectors of economy into tax net to increase the revenue earnings, simultaneously paying attention to education, health, and infrastructure development. Stabilization of macro-economic indicators was GOP’s another priority area. We are also bringing 7 million households into social safety net by providing them income support, health and education cover. Human resource development and skill development is another priority area. An integrated energy generation plan to meet energy requirements of commercial, domestic and industrial sectors was being put in place, Adviser added.

The discussion also focused on revamping of Planning Commission in Pakistan with an Overarching Policy Board that dynamically speeds up the implementation of all economic, development and social sector planning. Ambassador of France appreciated GOP’s political vision in fast-tracking its development agenda in sync with all stakeholders, adding that MOF may plan to meet its foreign development partners based in Islamabad in order to brief them on GOP’s ongoing economic development agenda, adding that MOF may make a presentation to zealous Pakistani investors based in Canada who were willing to be potential investors in Pakistan as he learnt it during his stay in Canada.

Adviser to PM on Finance agreed to go ahead with the proposal in weeks to come after necessary homework. Mr. Shaukat Tarin also briefed French Ambassador on rightsizing of state institutions in corporate sector in order to make them profitable units – a step that would help beef up domestic economy. Efforts were underway to shore up Pakistan’s forex reserve levels besides bringing the fiscal deficit down. Moreover, Pakistan has introduced a set of domestic policy framework to build its macro-economic indicators, Adviser explained.

Project financing was the major area wherein Pakistan and Friends of Pakistan are working together. The idea was to put in place a sustainable system of project-based development that was bilaterally beneficial to foreign investors and domestic partners, and ensure a system of development that was not lopsided. People of Pakistan, on 18th February, 2008, have mandated liberal political leadership into power that clearly reflects that people of Pakistan want to see their country, amongst comity of nations, as a liberal, progressive and fastly-developing Islamic state that pursues policies consistent with globally-accepted political norms. This was a key to Pakistan’s progress, Mr. Shaukat Tarin concluded.-SANA

ISLAMABAD: Chairman National Commission for Government Reforms, Ch. Abdul Ghafoor has said that the International Monetary Fund loan would help build confidence of Friends of Pakistan and major powers of the world for providing further financial assistance to stabilize Pakistan’s economy.

In an interview he said the IMF loan will improve Pakistan’s balance of payments and will steer the country out of its current fiscal crisis. He said the IMF loan would also help generate more job opportunities and increase economic growth in Pakistan. The Chairman expressed the hope that the approval of IMF package for Pakistan would also strengthen the confidence of other financial institutions like World Bank.-SANA