Contours of a programme with IMF: Choosing between approaching or not approaching IMF

Abstract

After coming out of the situation of choosing between approaching or not approaching, IMF for macroeconomic stabilization, the discussion now focuses on the nitty-gritty of Pakistan’s home-grown solution that it would like to negotiate with IMF for its forthcoming arrangement. However, the catch is to maintain a fine balance between the fiscal reforms that strengthen the overall fiscal responsibility at the federal and provincial levels under an IMF programme, and an indigenous agenda of structural reforms in power and public sector enterprise (PSE) management. One would have to be careful not to overcommit on performance benchmarks on power and PSE reforms without losing the pace of those reforms. Going to fund would have some structural and some implementation conditionalities. Structural conditionalities would include some prior actions, some performance criteria and certain benchmarks. On the other hand, implementation conditionalities would include quantitative performance criteria, actions implemented on time, actions delayed, actions not implemented, and actions against which a waiver was given by IMF. For a three-year programme under a front-load arrangement (which Pakistan cannot skip), almost half of the actions are required to be taken in the first year whereas rest of them are to be taken in 2nd and 3rd year. Usually the first year is focused on achieving stability of macroeconomic fundamentals, especially the stability of foreign exchange reserves. The second year is aimed at completion of stabilization measures and enhancing the efficiency through structural reforms, whereas the third year should focus on pro-growth and pro-job policies.