Ashraf Mahmood Wathra, Pakistan Central Bank chief shares insights about IMF’s program in Pakistan given in 2013.
He says this is the first time in Pak history that IMF program has been completed:
…..Pakistan – faced with a balance of payments crisis – embarked upon the IMF’s External Fund Facility Program in September 2013. At that time, the economy was mired in persistent energy deficiencies, declining development expenditures, rising inflation, and meager foreign exchange reserves. As a result, the country’s economic potential was on the decline and investor confidence was badly shaken. There was a need to reform policies and systems which could be instrumental in reversing the meltdown and add to the well being of Pakistanis.
I believe that the Government took the right step to enter the IMF program at that crucial juncture. Furthermore, its sincere efforts and commitment have been instrumental in driving the program to a successful completion. Indeed, the Government and State Bank of Pakistan have worked hard together to achieve this goal, and restored the much needed stability and stakeholder confidence in doing so. Before I go on to highlight the achievements of this Program, let me make two things clear: One, no IMF Program is an easy program. This explains why Pakistan has never in the past completed an IMF program. The fact that we have completed one also shows the seriousness towards reform. Two, having completed the IMF program, one should not be complacent about what remains to be done. Specifically, on the continuous consolidation of the macroeconomic stability gains we have made and the reforms that remain to be done.
What does IMF want in return? Similar things. Control of Fiscal deficits and Inflation, central bank autonomy and MPC, banking reforms etc:
Let us briefly look at some evident achievements made during the program.
Under the program, establishment of an independent Monetary Policy Committee and publication of minutes of the Monetary Policy Committee meetings, besides enhanced SBP autonomy, is expected to bring further transparency in monetary policy decision making. In plain words, these reforms provide us with a superior and structured decision–making technology. Similarly, strengthening of the internal operations of SBP, improvement in capital adequacy of banks, enactment of Credit Bureau Act, amendments to Anti Money Laundering Act, promulgation of Deposit Protection Corporation Act, and amendment to Financial Institutions Recovery Ordinance, are the major reforms that would increase financial sector resilience against any domestic and external shock. Indeed, these reforms directly address bank runs and related financial crisis.
Further, amendments in Fiscal Responsibility and Debt Limitation Act to enhance fiscal prudence, removal of Federal Board of Revenue’s powers to grant exemptions through issuance of Statutory Regulatory Orders and removal of tax exemptions are critical reforms that will go a long way to support a sustained increase in tax revenues. These reforms and range of other actions taken by the government have produced concrete results. These have not only helped the country to build the foreign exchange reserves and provide stability to foreign exchange market – a direct consequence of the program, but also supported a sustained increase in tax revenues, lower fiscal deficit, and a significant reduction in direct fiscal borrowings from State Bank of Pakistan.
Hmm. The program is so similar across countries.
Pakistan has faced so many economic crisis in recent years. One wonders why they keep getting into war zone with India with such poor economic situation at home…