Defence Minister Kh Asif’s claim that the country might not need the IMF after six months came at about the same time as the government began to contemplate pro-growth measures and to contemplate asking for the IMF to allow it relaxations of conditionalities to let it do so. The sort of arms sales that Kh Asif was hinting at were the subject of discussion at the meeting between the Chiefs of Air Staff of Pakistan and Bangladesh when the Bangladeshi purchase of JF-17 aircraft was discussed. Nothing absolute was discussed about that, but expedited delivery of Mashshak trainers showed that this was an area where Pakistan these could expect to generate revenue. Though getting onto an IMF programme has been touted as an agreement by the present government, it has also chafed at the restraints it has put on the economy, most notably its restraints in the matter of government deficits.
This has prevented the government from indulging in pump-priming, which it considers essential to stimulating growth. Not only does growth put more money in pockets to spend, but it also means that more jobs are created. Increased investment might even mean higher exports, though that depends on foreign demand. It can be seen that the government would like higher growth. Apart from the direct effect of a higher deficit, the government also seeks to create the fiscal space which would allow it to take measures that would enhance growth. These would include cutting the supertax rate for manufacturing, reducing the interest rate and lowering gas and electricity tariffs, all of which are key demands of industry. It seems the nub of the dispute remains the growth rate, which the government would lie to see over five percent, certainly markedly higher than the roughly three percent that has been registered for some years.
The government and the IMF must both realize that conditionalities set at the beginning of an EFF like the present one, spread over three years, may not reflect constantly changing economic reality. Also, it should be remembered that while the IMF wants to secure its loan, the government wants to win the next election. If the IMF does not care about growth, the government cannot do without it. The government may want the IMF Seal of Good Housekeeping, but it does not want to lose the next election either. The access to global money markets is not needed by countries that are prudent enough.
