IMF’s Nathan Porter: Current Programme Could Be Pakistan’s Last If Reforms Are Implemented
KARACHI: Nathan Porter, Director of the International Monetary Fund’s (IMF) mission for Pakistan, has suggested that the current IMF debt programme could be Pakistan’s last if the country fully implements the necessary economic reforms. This comes after Prime Minister Shehbaz Sharif expressed hopes that the IMF’s latest programme would be the final one for Pakistan.
In an interview with Voice of America, Porter discussed the key challenges to Pakistan’s economic growth, the IMF’s role in shaping the country’s economic policies, and factors contributing to the decline in foreign investment. He emphasized that Pakistan could achieve lasting economic stability by adhering to the IMF’s recommendations.
Following the IMF’s approval of Pakistan’s debt programme, Prime Minister Shehbaz Sharif reiterated that it would be the country’s last IMF programme if the government commits to economic reforms. Porter agreed, stating that stability has returned to Pakistan’s economy after facing severe uncertainty earlier in 2023. This newfound stability, he said, could serve as a foundation for further economic progress.
Porter highlighted that the IMF’s focus is on ensuring Pakistan maintains strong fiscal, monetary, and exchange rate policies while also liberalizing its economy to enable the private sector to play a larger role in economic development.
As for the future of the IMF’s 24th debt programme for Pakistan, Porter mentioned that the first review of the programme is scheduled for December 2023, with a potential report being submitted to the IMF board by March or April 2024.
Addressing concerns that the IMF imposed harsh conditions on Pakistan, Porter clarified that the IMF’s approach takes into account the unique challenges faced by each country. He added that the programme for Pakistan was designed to stabilize an economy struggling with high inflation and a significant current account deficit. He rejected claims that the IMF’s programme was overly strict, stating that it was tailored to address Pakistan’s specific issues.
Porter also discussed Pakistan’s relationship with China, one of its largest economic partners. He explained that the IMF’s stance on Chinese loans to Pakistan is consistent with its stance on loans from other countries, emphasizing that the focus is on sustainable debt management.
Regarding the agricultural sector, Porter touched on the IMF’s recommendations, which include reforms such as phasing out the support price system for food and eliminating certain agricultural subsidies. He pointed out that the support price system has disproportionately benefited wealthier farmers while placing a heavier burden on smaller farmers. Furthermore, the support price scheme led to increased flour prices last year, adding to the financial strain on the provinces.
Porter also addressed concerns about the economic impact of IMF policies on the Pakistani people. He emphasized the need for tax reform, suggesting that if the agricultural, retail, and property sectors contributed their fair share of taxes, it would alleviate the burden on ordinary citizens. These reforms would also free up government funds to improve public welfare.
Discussing foreign investment, Porter noted that excessive government intervention in business operations has deterred foreign investors. While Pakistan offers a large market and a substantial labor force, it often fails to attract investors due to unnecessary government interference. Porter recommended reducing the government’s role in business operations, reviewing tariffs and pricing policies, and reforming state institutions to create a more investment-friendly environment.
He also suggested that the government consider privatizing certain institutions and taking steps to reduce the cost of power generation, which could stimulate investment.
Lastly, Porter commented on recent reports about the government’s decision to halt the creation of new special economic zones (SEZs), which had been intended to provide subsidies and concessions to industries. The IMF does not see such incentives as beneficial for achieving long-term economic growth. Porter argued that these subsidies weaken businesses and hinder growth, stating that the government’s role should be limited to providing a basic framework for businesses to operate.
The IMF is expected to release a detailed report on these issues in the near future, providing further insights into Pakistan’s economic challenges and the steps needed to foster sustainable growth.
