Donors’ austerity demands end up hurting economic growth


Pakistan Today, a national newspaper, published an article I recently wrote entitled, “Donors’ austerity demands end up hurting economic growth” on August 21, 2011.

The article elaborates issues similar to those mentioned in my blog i.e. the economy of Pakistan, unpaid taxes, tax revenue, RGST, and the aid from the IMF.

The following is the beginning of my post:

“With the problematic IMF program expiring in September, the central donor-debate will shift from reviving the stalled arrangement to determining modalities for its replacement. That eventually only seven odd billion were disbursed from a total agreed $11.3 billion reflects the Pakistani government’s inability to meet revenue targets, resolve RGST issue and implement power sector reforms. But with the Fund’s successor programs invariably incorporating increasing austerity demands, it will take a monumental effort by the government to convince stakeholders of its ability to implement mandated reforms considering its track record.

What exactly does IMF’s structural adjustment program get for Pakistan. It bears noting that the said funding is not for budgetary support, but rather for Balance of Payments (BoP) support. However, since our reserves are reasonably healthy, last year’s export ride was unusually profitable even if this one seems choppy, imports are reduced, and remittances are good enough, our BoP position fails to make a technical case for donor need. But it is very important politically for dealings with other International Financial Institutions (IFIs) that fund more of our core running needs.”

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