20000219

'IMF ensures proper use of financial support'

RECORDER REPORT

LAHORE : While providing financial support to a member country, the IMF ensures that the member is pursing the policies that will ameliorate or eliminate its external payments problems. If she does not adhere to the agreed policy actions, there are chances that the financial programme may be terminated by the IMF.

This was stated by S M Raza, section officer of finance division, in his reply to a petition, filed by advocate M D Tahir, praying to the court to direct the respondent government, to recover the money looted by the politicians, bureaucrats and others, and pay back the same to the foreign financial institutions.

He said that the explicit policy commitments that members make to implement remedial measures in return for the IMF's support is known as conditionality. The borrowing country, therefore, undertakes to initiate the source of payments difficulty and prepare the grounds for "high quality" economic growth.

Along with its request for a loan, the potential reforms, typically undertaking to reduce government, expenditure, tighten monetory policy, judicious use exchange rate policy and certain other measures, which may effectively deal with structural problems being faced by the country.

The specifics of each IMP-supported adjustment programme are agreed mutually by the fund and the member country. The IMF's main concern is that the policy changes are sufficient to overcome the member's payments problems and do not cause any harm to other members.

When a member obtains financial assistance from the IMF, a host of policy measures and performance criteria are agreed. Some measures are introduced before the disbursement of the first trench and some during the programme period. The basic idea of financial assistance by the IMF to a member country is not only to address its structural problems but it also has an obligation to preserve the financial integrity of the Fund. It lends only on the conditions that the member uses the borrowed money effectively. In this way the measures/policies agreed for a particular financial assistance are binding on a member.

He contended in his reply that it is generally doubted that foreign economic assistance obtained by Pakistan during the last 50 years is perhaps not used accordingly or misappropriated.

The fact is that out of the total assistance received by Pakistan up to June 1998, only $ 32 billion were in the form of un-restricted balance of payments, support, while the remaining $ 97 billion were tied to specific projects or commodities, hence, there seems no reason to believe the un-founded doubt of the petitioner about the use of foreign aid. However, efforts are being made by the government to recover the loans from the loan-defaulters within Pakistan as well as outside the country.

He, therefore, contended that there is a system of Check and balance in the country, hence, the petition is not maintainable and prayed to the court to dismiss the same with cost.