ISLAMABAD: The International Monetary Fund’s (IMF) programme is scheduled to end in a few months. Even after its conclusion, however, Pakistan will continue to be influenced by the international body under its ‘Post-Programme Monitoring (PPM)’ plan, even though Islamabad will not seek any new resources, said economist Dr Ashfaque Hassan Khan here on Thursday.
Dr Khan, who is the Principal and Dean of the School of Social Sciences at NUST, was speaking at the launch of ‘Economic and Social Survey of Asia and the Pacific 2016’.
He explained why Pakistan will remain under the IMF programme, despite not seeking any fresh resources, saying that Pakistan’s outstanding loan from IMF was above its quota, which stands at around $6 to $7 billion. IMF laws state that even if a country does not require any more resources, it will remain under the PPM if its outstanding loans are more than the allocated quota and will pursue the same policy as in the case of the regular programme.
Dr Khan said, however, that there was a need to change the policy — an idea corroborated by several IMF officials he had met. The IMF officials had expressed the view that Pakistan’s finance ministry officials did not take up the matter during normal negotiations, he added.
In response to a question regarding Pak-India trade, Dr Khan said that the two countries should develop normal trade relations. He added, however, that one serious challenge to normalising bilateral trade were the non-tariff barriers imposed by India. “The playing field is not level,” he said, adding that trade would not move forward unless India withdrew the barriers.
Pakistan has been faced by multi-dimensional economic challenges since 2007-08, he said, adding that almost eight years of austerity measures have suffocated the national economy. The prolonged period of austerity or anti-growth policies has severely damaged Pakistan’s growth prospects, both in the short and medium term, he said.
While world leaders, including the IMF’s managing director, have changed their views regarding the “stabilisation first” policy for Euro-zone countries, the same policy is being advocated for a developing country like Pakistan, he said.
Pakistan is pursuing an IMF-dictated ‘Stabilisation First’ policy or ‘Austerity Programme’ since 2008-09, he said. The stabilisation first programme envisages a reduction in budget deficit, reduction in current account deficit, reduced public debt and measures to keep inflation at a low.
Dr Khan, who is a former economic adviser of the ministry of finance, stressed the need for change in the macroeconomic policy to strike a balance between stabilisation and development, besides changing the way fiscal and monetary policies are designed and implemented.
The bottom line should be that macroeconomic policies should not focus narrowly on reducing budget deficit, debt stabilisation and reducing inflation; rather, they should be supportive of growth and employment generation.