20000413

All external obligations

met in '99-2000 without

multi-lateral help

RECORDER REPORT

ISLAMABAD: Pakistan has been able to cover its external payments gap in the current financial year without any help from multi-lateral aid giving agencies, it is reliably learnt.

It was on June 2, 1999 that Pakistan had received $37 million only from the International Monetary Fund, and yet the country had met its external obligations to the tune of $1598.8 million upto March 31, 2000, and still maintained liquid foreign currency reserves at $1.6 billion.

Bilateral loan repayments of $5.2 billion were rescheduled under the Paris and London Clubs by end December 2000. However, loan repayments to the multi-lenders were made on time and all debt servicing has been fully covered upto end June, 2000.

IMF has been paid $233 million during the last nine months. World Bank and IDA debt of $343 million has also been repaid in the corresponding period, and, the Asian Development Bank has received $227.8 million between July 1999 and March 2000.

With the trade balance expected to be negative by $1.6 billion, Pakistan has also managed to pay for petroleum product imports of $798 million from its own reserves during the first nine months of the current financial year.

An unfortunate aspect, however, is the delay in putting in place an IMF programme by about three months. This is said to be primarily due to the suppression of fiscal gap of Rs 50 billion by the previous governments, which was reported by the new government to the Fund in order to restore the credibility of the country and come clean.

Despite a fiscal audit by the Fund staff, the reporting error was not, unearthed by them and the new government volunteered the information. It is said that non-bank borrowing was used to meet Rs. 16 billion in additional defence expenditure, Rs 31 billion in debt servicing on Government Savings Schemes and another Rs 3 billion repayment against external obligations.

The correction of suppression of Rs 50 billion on the revenue side of the budget resulted in fiscal deficit to bloat to Rs 197 billion or 6.08 percent of the GDP.

The new helmsmen have given clear instructions to their economic team not to play a "cat and mouse game" with the Fund and World Bank teams and to make no attempt to withhold any information as was the norm under the two democratic governments though of different political hues, in the past.

After receiving detailed presentation from various ministries and departments about the home grown economic package, the Fund and Bank missions have gone back and Round II of the negotiations will begin, with policy discussion between Finance Minister Shaukat Aziz and Deputy Managing Director of the Fund Stanley Fisher and Bank President James Wolfenson between April 14 and 22nd in Washington.

The new Managing Director of the Fund from Germany is to take charge in October this year.

After Round II, the third round will be held again in Islamabad to put in place a programme which could be presented before the Board of the two institutions for approval.

However, the decision to hold the third round and the attitude of the two Bretton Woods lenders will be based on the signal the US Executive Director on their Boards get from the White House.

In order to bring Pakistan back on track with these institutions, Finance Minister Shaukat Aziz is scheduled to hold discussions with the officials from both the US Treasury and the State Departments. The outcome of these top level talks will depend largely on the ability of the present government to address the four core issues which were clearly spelled out in President Clinton's speech to the Pakistani people on March 25, 2000.

Knowledgeable sources gave no reduce to any notion that Chief Executive General Pervez Musharraf's Far East trip or the stop-over in Libya had any thing to do with Pakistan's need for financial assistance. It is said these trips were primarily aimed to elicit interest in these countries towards the country's privatisation programme which now has oil and gas sector on top of the agenda.