The IMF delegation led by Mr. Adnan Mazerei met Pakistani authorities to discuss IMF’s Stand-by-Arrangement to patch together economic aid and assistance to Pakistan as it builds out of the recent summer floods. A press release was put out by the mission. It reads, in part:
“Progress has been made regarding the measures to be implemented in the context of the authorities’ economic stabilization and reform agenda, while protecting the poor. Specifically, we have reached broad agreement on the macroeconomic framework and a revised 2010/11 budget deficit target to help flood victims, and rein in inflation, which hurts the poor most.
“The authorities consider that the reformed general sales tax is essential to raise revenue to finance relief for flood victims, poverty reduction, and infrastructure reconstruction. Tax reform is also needed to make the tax system more equitable. The authorities recognize the critical importance of energy sector reform. They have initiated reforms aimed at reducing load shedding, which is severely hurting economic activity; curtailing energy subsidies in order to free up budget resources for spending in priority areas; and resolving the issue of circular debt.”
This means that the IMF is dealing with Pakistani’s urgent financial needs through a combination of changes in fiscal policy and monetary policy. These are long-term policy solutions to long-term needs. Pakistan’s needs however are urgent and immediate. Pakistan needs an infusion of international aid money that seems to have tricked into its borders in stark contrast to the Himalayan deluge that overwhelmed it. This is not tantamount to the claim that retooling fiscal and monetary in Pakistan isn’t important. This is just to say that at this time focusing on fiscal and monetary policy solutions for an emergency situation that will not abide by IMF deadlines, might not be the right policy prescription.
Pakistan may not be able to afford, in time and in lives, the hard to implement policy prescriptions that the IMF has suggested. Examining the press release for workable solutions and missing coded language on Pakistan’s policy failure does not offer any help. The IMF press release surely would not have trumpeted all the dismal missed opportunities on the ground that the mission was sure to have witnessed. Instead, a sensible policy option that will have immediate impact would be to forgive a portion of Pakistan foreign debts.
