950807

IMF mission due

on 25th: no difficulty

expected in talks

IKRAMUL HAQ

ISLAMABAD: An IMF mission, led by Division Chief Brock Short, arrives here on August 25 for consultations on surveillance under Article-IV.

Consultation under this article is an annual obligation of IMF for macro-economic development in most of the countries. But informed sources stated that a part of the mission's task will be to discuss how the slippages in the IMF programme leading to non-release of the ESAF tranche could be rectified, and the programme put on track again.

During the recent discussions in Washington between IMF and a Pakistan team led by Prime Minister's Adviser on Economic Sector Shahid Hasan Khan, both sides had agreed to have close contact and exchange of information on macroeconomic development in Pakistan.

Official sources told Business Recorder that the release of the tranche was withheld last February as the Pakistani authorities had not finalized their budgetary proposals for 1995-96. The last Brock Short mission concluded on a promising note of reviewing the performance of the economy and the targets in August.

The Pakistan side continues to stress that it remains committed to the IMF Programme and the country has made impressive gains in this direction. It is pointed out that two-third of the revenue target of Rs.262 billion has been achieved and expenditure has only grown by eight percent in 1994-95. Furthermore, attempt has been made to shift the borrowing for budgetary support from banking sector to the non-bank sector by raising the return on government saving schemes. This is reflected in the break-up of the budgetary deficit of Rs.107 billion, comprising Rs.31 billion borrowed from broad, Rs.25 billion from the banking sector and Rs.51 billion from non-banks (public savings).

Following this month's consultations, the dialogue on ESAF would continue either on a Pakistani team's visit to Washington or another IMF visit to Islamabad or through the Resident IMF mission. This process, it is believed, will take sometime. Already the release of tranche for February 95 is stayed and may be some more months will elapse before the IMF programme is put back on the rails. Therefore, sources indicated that instead of three years time span, ESAF would continue in the fourth year.

Informed sources stated that both sides do not see any difficulty in the negotiations as both want to return to the programme. In the meantime, IMF policy guidelines and advice will be welcome to the Government till ESAF is renegotiated.

The IMF mission which will stay here for a week will include the Deputy Divisional Chief Antonio, Rakia Molatini and tthe Resident Chief Shamsuddin Tareq.

It may be recalled that apart from two major slippages in the budget regarding bringing fiscal deficit to four percent and reducing import tariffs to 55 percent, therewere few other failures such as higher bank borrowing for budgetary support and failure to adequately tax agriculture by raising the Produce Index Unit to 400 for tax purposes.

Independent economists insist that the country should have adhered to the conditionalities of ESAF because otherwise more stringent measures would have to be adopted by the country in the coming years.

One economist cautioned that after 1997, elections would weigh heavily on the government and radical remedies would be difficult to take. The current year and the next provide leeway enough to the government to undertake difficult and harsh measures which would inject macroeconomic stability . The earlier it was done, the better for the economic future of the country.